China’s November CPI rose to 0.7% year-on-year, in line with expectations, while core inflation held steady at 1.2% and the Producer Price Index remained in contractionary territory, keeping domestic demand weak and supporting the US dollar’s ongoing downtrend against the Chinese yuan, BBH FX analysts said.
USD/CNH downtrend remains intact amid currency dynamics
“China November CPI matched expectations. Headline inflation accelerated to 0.7% y/y (highest since February 2024) versus 0.2% in October driven by higher food prices while core CPI remained at 1.2% y/y for the second straight month. PPI recorded -2.2% y/y (consensus: -2.0%) versus -2.1% in October and continues to indicate that deflationary pressure remains high.”
“China’s benign inflation backdrop continues to suggest that consumer spending is very weak. In our view, a continued appreciation of the Chinese currency could help the country shift its growth model towards consumer spending by boosting disposable income through cheaper imports. Bottom line: USD/CNY downside is intact.”
