USD/CNH Briefly Above 6.50

Offshore yuan weakened despite a weaker greenback on Thursday, USD/CNH rose to 6.5001 before pulling back slightly into the close- this was the first time over 6.50 since April, though the move was brief -the pair last at 6.4935. Global risk assets took a hit on Thursday, while the move was accelerated by continued talk of an RRR cut, the confluence of factors saw CNH post its biggest one-day decline since June 16.

• Focus today turns to inflation data from China. CPI is expected to print 1.2% in June from 1.3% in May, PPI is expected to slow slightly to 8.8% from 9.0%. Goldman Sachs are slightly more optimistic than the median: "We expect CPI inflation to come in at 1.3% yoy in June, same as in May on a year-on-year basis and +0.1% above consensus. Pork prices continued to fall in the month while egg and fresh vegetable prices rose. Nonfood inflation probably slowed on a month-over-month basis (as suggested by lower price indexes under various PMIs) but rose in year-on-year terms on low bases a year ago. We expect PPI inflation to stay unchanged in June at 9.0% yoy, same as in May. However, PPI inflation might have moderated in June on a sequential seasonally adjusted month-on-month basis after peaking in May as policymakers managed to curb metal price inflation through administrative measures, although oil prices continued to drift higher in June."