Rabobank's Global Strategist Michael Every notes Europe’s evolving role in global finance as Euroclear considers accepting China onshore bonds traded in Hong Kong as collateral. Every stresses this move could support yuan internationalisation just as the EU seeks greater strategic autonomy and wider global usage of the Euro, particularly in trade commodity finance where Euro usage remains limited.

Euroclear, yuan and Euro usage

"Yesterday, the FT reported Euroclear, one of Europe’s largest financial intermediaries with over €43 trillion of assets under custody, is considering accepting China onshore bonds traded in Hong Kong as collateral, not just offshore bonds as now."

"Euroclear states this would support Beijing’s efforts to promote yuan internationalisation to counterbalance the global dominance of the USD… at a time when the EU’s push for strategic autonomy, heightened by the Iran War energy crisis, is accentuating the need to boost global usage of the euro, not the yuan."

"That’s particularly the case in trade commodity finance, where the single currency only accounts for around 6% of the global total in SWIFT, and even less considering more of that trade is being done on China’s CIPS system."

"Of course, Euroclear is free to do whatever it wants, but it remains to be seen how this plays out politically and geopolitically now the news is out - the US will note the timing well, just as Trump is in Beijing looking for bargains."

"If this is seen as a European bargaining chip vs. the US in a game of geoeconomic poker, note USD swaplines have now been openly politicised by the US Treasury via Argentina and the UAE, and next Fed Chair Warsh has stated that even Fed swaplines are not an area subject to central-bank independence."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)