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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.
CHINA DATA
China inflation surprised meaningfully on the downside in August. Headline CPI printed at 2.5% y/y, versus 2.8% expected. Outside of food (+6.1% y/y), price pressures remain muted. Services CPI up just 0.7%, while core was unchanged at +0.8% y/y. Only one sub sector out of eight (recreation and education) recorded a rise in y/y momentum.
- The first chart below overlays core CPI versus the 2yr government bond yield. Whilst bond yields look to break 2.00%, today's CPI data is only likely to see calls for further policy support grow.
Fig 1: China Core CPI Versus 2yr Government Bond Yield
Source: MNI - Market News/Bloomberg
- For the PPI, the downside surprise was even larger at 2.3% y/y versus +3.2% expected. Outside of mining and raw materials, price pressures were modest. Base effects suggest continued downside PPI momentum in the months ahead.
- The second chart below updates the one we presented this morning for today's PPI outcome.
- It reinforces the point around less need for CNY NEER strength, as upstream price pressures continue to moderate.
- USD/CNH has popped back above 6.9500 post the inflation prints, versus an earlier low close to 6.9430. It is underperforming broader USD selling on the day, with DXY losses now beyond 0.5%, while CNH has only firmed by 0.15/0.20% so far today.
Fig 2: 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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