Yuan Steady As Markets Assess Inflation Data, Sino-U.S. Tensions

Spot USD/CNH has meandered as participants weighed marginally better than expected Chinese inflation figures against flaring Sino-U.S. tensions. The rate last operates just shy of unchanged levels, at CNH6.9695.

• China's CPI inflation printed at +2.7% Y/Y vs. exp. of +2.6%, while PPI inflation registered at -2.4% Y/Y vs. exp. of -2.5%. Analysts pointed to inflationary pressure on food prices from disruptions caused by recent floods in central & southern China. Furthermore, core CPI inflation slipped to the lowest level since 2010.
• In the latest escalation of Sino-U.S. spat, the White House sanctioned Hong Kong leader Carrie Lam and 10 other HK/Chinese officials, sent Health Sec Azar for an official visit to Taiwan and teamed up with the UK, Australia, Canada and NZ in criticising Beijing's Hong Kong policies.
• PBoC Gov Yi told Xinhua that China's MonPol will be more flexible, appropriate and targeted, adding that credit growth should be higher. He added that the country will continue to implement "phase one" trade accord with the U.S.
• A break above the CNH7.0 mark would give bulls a green light for targeting Jul 30 high of CNH7.0171. Bears look for a dip under Aug 5 low of CNH6.9321, which would turn focus to Mar 9 low of CNH6.9049.
• Looking ahead, main focus falls on China's monthly economic activity indicators, which will be released on Friday.