Fair value of euro against yuan: model shows that yuan is still undervalued against the euro by about 15% (Deutsche Bank)
Deutsche Bank used 10 models to evaluate the valuation of the yuan against the euro and the hypothetical German mark.
Deutsche Bank used 10 models to evaluate the valuation of the yuan against the euro and the hypothetical German mark. The results showed that the yuan was still undervalued against the euro by about 15%. The core background is that the EU is facing "China Shock 2.0" and the trade deficit is expanding. The conclusion points out that Germany's competitiveness challenges are more prominent than those of the entire Eurozone, and further appreciation of the RMB can alleviate pressure on Europe. One-sentence conclusion: The exchange rate model points to a structural undervaluation of the RMB, especially under the comparison of trade competitiveness with Germany. The RMB will have appreciation pressure in the medium term, which will have a profound impact on the Sino-European trade pattern. Good/bad: RMB appreciation is good for Chinese importers (such as airlines and energy companies) and Eurozone exporters. It is bad for China's export-oriented enterprises. The market's pricing of the RMB may still be dominated by expectations of a strong U.S. dollar, with insufficient attention paid to the relative undervaluation caused by structural problems in the Eurozone. Catalysts: 1) China’s central bank’s exchange rate policy and central parity setting; 2) China-EU trade negotiations and tariff policy progress; 3) Differences in interest rate decisions between the European Central Bank and the Federal Reserve.