China: Disinflationary pressures emerge in July – UOB

Pablo Piovano FXStreet

UOB Group’s Economist Ho Woei Chen, CFA, reviews the latest inflation figures in China.

Key Takeaways

In line with expectation, China’s CPI headed into a negative reading for the first time since Feb 2021 while PPI registered its 10th straight month of price declines in Jul.

Having said that, the deflationary condition in China are likely to be mild and temporary. We expect China’s headline CPI to return to positive much sooner than the PPI, noting that headline CPI reversed its 5 straight month of m/m declines and core inflation has actually picked up in Jul.

Looking ahead, the severe floods in parts of China this month could put some upward pressure on food prices but sluggish external and domestic demand as well as the slack in the job market will still keep price pressures weak in general. This continues to support further easing of China’s monetary policy. As such, we further lower China’s headline inflation forecast for 2023 to 0.4% from previous projection of 0.8% (2022: 2.0%) and our PPI forecast to -3.1% from earlier call of -2.0% (2022: 4.1%).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold: Gains remain capped by $4,400

Gold regains composure and trades with decent gains on Friday, managing to refocus attention on the $4,440 mark per ounce troy. Therefore, the precious metal reverses Thursday’s decline as the US Dollar alternates gains with losses at the end of the week.

Ripple Price Forecast: XRP extends decline as returning ETF inflows fail to lift outlook

Ripple (XRP) falls below $1.33 on Friday, marking the third consecutive day of declines. The token continues to track the broader cryptocurrency market downturn, with investors closely monitoring heightened macroeconomic uncertainty ahead of the United States (US) Consumer Price Index (CPI) release and next week’s Federal Reserve (Fed) monetary policy decision.

Weekly focus – The hawks set the tone

Risky assets came under pressure this week as energy prices kept creeping higher and the ECB surprised the markets with a hawkish tone. The price of Brent crude touched USD 110 per barrel on Thursday night, highest since mid-May, as news emerged that the Yemeni Houthis had reached control of key port cities and islands near the Bab el-Mandeb strait.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.