Still Lagging Broader USD Weakness, Feb CPI Boosted By LNY

USD/CNH recovered sharply from intra-session lows on Friday near 7.1850, with the pair rebounding back above 7.2000. We track close to this level in early Monday trade. Volatility was evident around the US NFP print, with CNH following broader dollar trends. On Friday, onshore USD/CNY spot ended the session at 7.1874. The CNY NEER (J.P. Morgan index) lost a further 0.15% to 123.68. This index fell 0.65% last week, and is back to mid Jan levels, as the yuan underperformed the broader USD sell-off.

• On Saturday, China's Feb CPI was stronger than expected, rising 0.7% y/y, versus 0.3% forecast and -0.8% prior. The NBS highlighted this compared to a lower base as the Chinese New Year occurred in January last year. Pork prices, a main CPI driver, rose for the first time after nine consecutive months of decline. Service prices gained 1.9% y/y to drive up CPI by about 0.76 percentage points. Prices of tourism and air travel increased by 23.1% and 20.8%. The PPI was slightly weaker than expected at -2.7% y/y, versus -2.5% forecast.
• This Friday we have the 1yr MLF decision no change is expected by the consensus (currently at 2.5%). Note on Saturday China's Housing & Urban-Rural Development Minister stated that housing is for living, not speculation (see this link). This line had been omitted from the NPC for the first time since 2019 in Premier Li's work report.
• Also out on Friday is Feb house price data. This week should also deliver new loans/aggregate finance figures for Feb, which should see a meaningful down step from the Jan pace, as is the typical seasonal norm.
• Broader policy settings are still expected to be eased in China in the first half, which, all else equal remains a yuan headwind.