11 Apr 2014
Asia EM Express: China's March inflation numbers in line with forecasts
FXStreet (Łódź) - People’s Bank of China Deputy Governor Yi Gang said on Thursday that in order to maintain financial stability China should carry on with the “bold” yuan reform, gradually liberalizing interest rates and capital markets.
"You can do some cautious, step-by-step interest rate liberalization, at the same time you can do some gradual capital account convertibility. You cannot open the capital account overnight," Yi Gand stressed.
PBOC Governor Zhou Xiaochuan, who also spoke on Thursday, suggested that China's policy didn't require any major adjustments as growth remained at normal levels. The country's first quarter GDP numbers are due out next week and a slowdown to 7.3% from 7.7% in projected.
According to Derek Halpenny from BTMU: “A weaker than expected GDP data next week would likely lead the market to speculate on additional stimulus measures by the authorities.”
Economic data
China's CPI came in close to expectations in March. On an annual basis inflation picked up to 2.4%, following 2% in February and almost in line with forecasts of +2.5%. Month-on-month CPI fell 0.5%, compared with the 0.5% increase.
The swing factor this month were rising fresh food prices. Prakash Sakpal from ING suggests that inflation could jump on a disruption in food supply or an increase in oil prices, which shocks are “unpredictable.”
“Absent such shocks and with a favorable base effect in the food component through the yearend we expect CPI inflation to hover around 2% in the rest of the year,” the analyst adds. “We think low inflation lowers the bar to PBoC easing in the event growth concerns become more pressing.”
The Chinese Producer Price Index drop accelerated in March, falling 2.3% year-on-year, down from -2% in February and slightly below forecasts of a 2.2% decrease.
Technicals
The USD/CNY fell by 0.06% to 6.2100. The daily FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was at 64 at the last close and has fallen to 30 so far todsy. The Daily 2-StDev Volatility Bandwidth was shrinking at 166, with ATR (14) shrinking at 123. The 1D 200 SMA was at 6.1099, while the 1D 20 EMA was at 6.1946.
"You can do some cautious, step-by-step interest rate liberalization, at the same time you can do some gradual capital account convertibility. You cannot open the capital account overnight," Yi Gand stressed.
PBOC Governor Zhou Xiaochuan, who also spoke on Thursday, suggested that China's policy didn't require any major adjustments as growth remained at normal levels. The country's first quarter GDP numbers are due out next week and a slowdown to 7.3% from 7.7% in projected.
According to Derek Halpenny from BTMU: “A weaker than expected GDP data next week would likely lead the market to speculate on additional stimulus measures by the authorities.”
Economic data
China's CPI came in close to expectations in March. On an annual basis inflation picked up to 2.4%, following 2% in February and almost in line with forecasts of +2.5%. Month-on-month CPI fell 0.5%, compared with the 0.5% increase.
The swing factor this month were rising fresh food prices. Prakash Sakpal from ING suggests that inflation could jump on a disruption in food supply or an increase in oil prices, which shocks are “unpredictable.”
“Absent such shocks and with a favorable base effect in the food component through the yearend we expect CPI inflation to hover around 2% in the rest of the year,” the analyst adds. “We think low inflation lowers the bar to PBoC easing in the event growth concerns become more pressing.”
The Chinese Producer Price Index drop accelerated in March, falling 2.3% year-on-year, down from -2% in February and slightly below forecasts of a 2.2% decrease.
Technicals
The USD/CNY fell by 0.06% to 6.2100. The daily FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was at 64 at the last close and has fallen to 30 so far todsy. The Daily 2-StDev Volatility Bandwidth was shrinking at 166, with ATR (14) shrinking at 123. The 1D 200 SMA was at 6.1099, while the 1D 20 EMA was at 6.1946.