China’s headline inflation unchanged in June, authorities likely to keep USD/CNY around 6.8 for some time

Chinese consumer price inflation was unchanged in June. The headline figure came in at 1.5 percent year-on-year. But after seasonal adjustment, the country’s inflation rose just 0.14 percent sequentially in June, as compared with a 0.25 percent rise in the earlier month.

The trend growth of China’s headline inflation continues to be subdued, indicating towards a soft underlying demand. Meanwhile, the country’s PPI inflation was 5.5 percent year-on-year in June. Breaking into the PPI data, the producer goods rose 7.3 percent, while consumer goods rose just 0.5 percent. However, the unevenness of the PPI implies that Chinese economy continues to face considerable structural challenges. While fiscal stimulus and a solid property market aid in stabilizing the economy through solid credit growth, China continues to struggle to find a long-term solution, noted Commerzbank.

Looking at the USD/CNY pair, it seems that the market tends to believe that for some time the Chinese authorities would like to keep the pair at around 6.80. The People’s Bank of China set the USD/CNY fixing below 6.80 on Monday.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Chinese yuan was neutral at 23.0391, while the FxWirePro's Hourly Strength Index US Dollar was neutral at 28.4229. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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