USD/CNH Pulls Back, CNY NEER Still Lower, May Inflation On Tap Today

USD/CNH continued to pull back post the Asia close on Thursday. We got sub 7.1200 late in the NY session and we currently sit close to this level. CNH gained a little over 0.35% for Thursday's session, trailing some of the broader USD indices though (the DXY lost 0.73%). USD/CNY finished up near 7.1120, while the CNY NEER edged down a little further to 122.30 (J.P. Morgan index).

• Much of the focus today will rest on the May CPI data, particularly given on-going speculation of further stimulus measures and this week's deposit rate cuts by the major banks.
• The market looks for headline y/y CPI at 0.2%, versus 0.1% prior, while the PPI y/y is projected at -4.3% from -3.6% in Apr. We are also still waiting for May aggregate credit/new loans data.
• Onshore government bond yields saw slightly higher levels for the 2yr (back close to 2.10%), while the 10yr held steady around 2.70%.
• Onshore equites finished 0.80% higher for the CSI 300, closing near 3820 yesterday, while the Golden Dragon index rose 1.59% in Thursday US trade.
• Elsewhere, there is some attention on local government debt, with Tianjin and Kunming in focus (see this link). The city of Kunming rattled investor confidence last month when it delayed a bond payment until the last minute.
• In Shanghai yesterday, regulators reportedly held a meeting with financial institutions to discuss property market risks and investor confidence (see this link for more details). This coincided with yesterday's Lujiazui Forum in the city, where we heard from key regulators.