Forex Trading Library

China CPI & CNH Recent Reaction

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A new week with lack of fundamentals from Europe and the US. Yet, the market volatility increased ahead of the President Elect Donald Trump press conference later this week. However, the US Dollar lost some of its Friday’s gains, which seems to be a short term play ahead of the press conference. In Asia today, some economic figures were released from China, which had a medium impact on the markets. In today’s article, we will look at these figures, what do they mean for PBoC and CNH in the coming days.

Definitions:

Consumer Price Index: this index measures the change in the price of goods and services purchased by consumers. The average price of various goods and services are sampled and then compared to the sampling done a year earlier. Released monthly, usually about 10 days after the month ends.

Producer Price Index: measures the change in the price of goods purchased and sold by producers.

Why This Is Important?

Consumer Price Index: Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to respond by raising interest rates.

Producer Price Index: It’s a leading indicator of consumer inflation – when producers pay and charge more for goods the higher costs are usually passed on to the consume.

Outcomes

Indicator

Actual

Forecast Prior

CPI YoY

2.1%

2.2%

2.3%

PPI YoY

5.5% 4.6%

3.3%

China Inflation Orbex

Today’s figures were mixed, the major inflation index showed a slowing down back to 2.1% in December down from 2.3%, despite the fact that the estimates were to slow down slightly back to 2.2% only. Yet, today’s number remains the fourth highest reading in 2016.

As for the PPI, it showed a significant increase by 5.5% in December compared to 3.3% in November of last year, despite the fact that it had been anticipated to rise slightly to 4.6% only. This is the fourth monthly increase in a row, one we have not seen since 2011 and the highest reading since September of 2011.

CNH Remains Around 6.8

USDCNH posted another high near 7.0 barrier. However, the pair managed to drop all the way back below 6.9 and stabilized around 6.87 today. China’s authorities sent out another warning to speculators who are betting against CNH. Moreover, the recent measures that the government announce to curb capital outflows has led to a significant rise in HIBOR. However, its back on earth around 6.8% in Asia, while it soared above 100% last week. In the meantime, the CNH weakness is needed, but the government is looking for a very gradual devaluation . Yet, the 7.0 barrier is not far away and might be seen very soon.

CNH Orbex

Levels To Watch – USDCNH

S3

S2 S1 Pivot R1 R2 R3
6.9226 6.9258 6.9317 6.9349 6.9408 6.9440

6.9499

 

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