China CPI Surges Again

CPI data from the world’s second largest economy overnight showed that price pressures continued to grow last month. CPI was seen jumping 1.5% on the month, up from the prior 0.9% reading and well above the 1.1% result forecasted. Additionally, China headline PPI came in at 8.3%, beating expectations for an 8.1% result.

The readings are in line with the uptick in global inflation which, along with the Russian invasion of Ukraine, has come to dominate news flow this year. With prices surging in China, at a time when fresh lockdowns are dampening economic activity, there are fears of further increases in price pressures as social restrictions ease.

In light of the fresh lockdowns, the market is widely expecting the PBoC to action fresh easing this year. However, with the country’s rates already suffering a negative yield premium with US bonds, further easing might drive higher outflows to the US, which is not want the Chinese government wants to see. This dynamic is further reinforced by the sharp uptick in hawkish Fed expectations on the back of last week’s FOMC minutes and broader Fed commentary.

Technical Views


Following the breakout above the bear channel from last year’s highs, USDCNH has since stalled at the 6.4018 resistance. With 6.3594 underpinning the current phase of price action, however, the focus remains on a further push higher near term. Momentum indicators are turning higher, keeping the higher levels of 6.4241 and 6.4490 in view as targets for bulls.