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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CNH
The data focus today rests with August inflation data. The market expects headline CPI to nudge up to 2.8% y/y from 2.7%. Food prices are the main source of upside pressure in recent months, particularly in pork. PPI is expected to moderate further to 3.2% y/y, from 4.2% in July. Waning upstream price pressures suggests less need for CNY outperformance on a NEER basis, all else equal.
- Core CPI momentum is expected to remain soft, in line with a weak domestic demand backdrop. Last month the core print came in at 0.80% y/y, the softest pace since early 2021.
- Whilst weaker upstream (PPI) price pressures suggest the CNY NEER can roll over further, see the chart below, the near term focus on curbing USD/CNY upside may still leave the yuan outperforming any renewed USD upswings.
- For USD/CNH, we are drifting lower in early trade today, sub 6.9600. The pair found support ahead of 6.9500 overnight. This level could be tested again today, as broader USD momentum is softer.
- Elsewhere, covid case numbers are ticking higher in Beijing, 19 for yesterday. The authorities told citizens to minimize travel during next Monday's national holiday and for holidays in October as well. It also outlined testing requirements which will stay in place until the end of October (see this link for more details).
Fig 1: China PPI & CNY NEER YoY
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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