Chinese Yuan, USD / CNH, Inflation, CPI, Covid – talking points
- The Chinese yuan is in focus ahead of China’s August inflation data points
- CPI and PPI data are likely to influence PBOC’s near-term policy decisions
- USD / CNY trades within a triangle and SMAs close to a bullish crossover
Thursday ‘s Asia – Pacific Outlook
Asia-Pacific trading appears to be another risk mitigation session after Thursday Wall Street shares fell and refuge US dollar rose at Wednesday’s New York session. Rising Covid-19 cases, valuation problems and the outlook for central bank policy are putting investors back in high-beta equities and risk-sensitive currencies. Chinese yuan and Australian dollar is the focus today, China should provide August inflation data.
Economic forces also report factory prices through the producer price index (PPI). According to a Bloomberg study, analysts expect this figure to exceed 9.0% per year. This would be unchanged from the July figure. The same study shows that the consumer price index (CPI) remains at 1.0%.
Chinese factories and commodity manufacturers are rushing to increase input costs as Covid-19 affects global supply chains. Disruptions in agriculture, mining and shipping ports sent commodity prices to the skies earlier this year. However, the fact that these increased costs have not been passed on to consumers leaves some flexibility to Chinese policymakers. Analysts are divided on whether the People’s Bank of China (PBOC) will ease its policy in the coming months by reducing the minimum reserve ratio (RRR). Such a move would probably put pressure on the yuan.
Earlier this year, Chinese officials granted permission for metals, including iron ore and copper, from strategic state reserve stocks to price cooling. Growth concerns over Covid have pushed down prices in recent months, achieving the desired effect in China. The fall in the price of copper and iron ore may help ease the pressure on steel producers. However, if producer prices exceed analysts’ expectations today, this could renew concerns in Beijing, especially if consumer prices rise in parallel.
Although iron ore and copper prices are declining, other commodities continue to rise. Aluminum prices fell to a 13-year high overnight. The outbreak was probably caused by a military coup in the West African country of Guinea. The state provides a key component in the production of aluminum. China is one of the largest importers of aluminum, everything from buildings to aircraft.
USD / CNH Technical Forecast
The Chinese yuan is weaker against the US dollar this week USD/ CNH increase of about 0.50%. The pattern of the symmetrical triangle has developed after the currency pair fell sharply from its peak in March 2021. Breaking above or below the support / support is likely to lead to a longer direction. However, a golden cross may soon form if the 50-day moving average (SMA) monitoring is slightly longer than the 200-day SMA. If SMAs intersect, this could lead to price increases.
USD / CNH daily schedule
The chart has been created TradingView
CHINA Yuan COMMERCIAL ASSETS
– Written by Thomas Westwater, DailyFX.com analyst
Be in touch Thomas, use the comments section or below @FxWestwater Twitter