CNY: Inflation recovery supports modest gains – Commerzbank

💡 DMK Insight

China’s potential exit from deflation could shake up global markets, and here’s why that matters: With consumer prices rising 1.3% year-on-year and producer prices showing month-on-month increases, this shift indicates a strengthening demand that could lead to tighter monetary policy. Traders should keep an eye on commodities and forex pairs sensitive to Chinese economic data, especially those involving the Australian dollar and other commodity-linked currencies. If this trend continues, we might see a bullish sentiment in these markets, as higher demand typically supports prices. But there’s a flip side: if inflation rises too quickly, it could prompt the People’s Bank of China to tighten policy sooner than expected, which might spook investors. Watch for key levels in commodity prices and the AUD/USD pair, particularly if it approaches resistance around recent highs. The next few months will be crucial as we gauge whether this inflationary trend is sustainable or just a blip.