USD/CNY: Gradual reflation and policy easing guide CNY path – MUFG

💡 DMK Insight

China’s CPI slowdown isn’t just a seasonal blip—it’s a signal for traders to watch closely. The January CPI figures, influenced by the Chinese New Year, show a misleading dip in inflation, primarily driven by food and service prices. This could lead to misinterpretations in the market, especially for commodities and tech stocks that are sensitive to inflation trends. The narrowing of PPI deflation, thanks to rising global metals prices and tech demand, suggests that underlying inflation pressures might be building, which could impact monetary policy decisions. Traders should be cautious, as this could lead to volatility in related markets, particularly in commodities and tech stocks that rely on stable pricing. Here’s the thing: while the mainstream narrative might focus on the CPI drop, the real story is the potential for a rebound in inflation metrics that could catch many off guard. Keep an eye on the PPI trends and global metals prices as they could provide early signals of shifts in market sentiment. Watch for any unexpected moves in commodities or tech stocks in the coming weeks as these dynamics unfold.