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The USD/CNY was on a standstill on Friday after weak Chinese Consumer Price Index (CPI). The pair was trading at 0.1542 ahead of the Fed monetary policy report later in the day.

USD/CNY Outlook

China’s Inflation Concerns

USD/CNY pair edged lower after the release of China’s Consumer Price Index (CPI) and Producer Price Index (PPI). According to the National Bureau of Statistics, China’s CPI for June came in lower at 0.4% MoM. It was also 1.1% lower on a year-on-year basis missing its 1.3% estimate.

June’s CPI snapped from its four-months winning streak signaling a transitory end in the rise of inflation. Pork price dragged the index with a 36.5% decline in June. China’s food price fell 1.7% in the same month. Decline in price factors hampered the country’s CPI.

China’s Producer Price Index for June hit its estimate forecast. However, it was 0.2% lower than the previous month’s. it came in at 8.8% from 9.0% in May.

The fallback in the country’s PPI was traced to a drop in price growth in different industries. According to the country’s NBS, industries including chemical materials, oil and gas exploration and ferrous metal smelting recorded a decline in their price growth.

In May, China’s factory gate prices were hovering records high. The prices hit their highest annual rate in over 12 years. This was driven by a surge in commodity prices.

US Economic Concerns

US initial jobless claims for the week ending July 3 were up to 373,000. This was weaker than the estimated forecast of 350,000 and a 2,000 increase from the previous week. The previous week’s level was revised up 7,000 to 371,000 from 364,000.

The number of continuing jobless claims came in at 3,339,000 which was a 145,000 decline from the previous week’s. This represented the lowest level for insured unemployment since March 2020. The increase in jobless claims indicates a slowdown in job growth in the second half of 2021.

The USD/CNY will react to the Federal Reserve’s Monetary policy report later in the day. Investors are looking ahead of the report to gauge whether the Fed will consider scaling down its stimulus earlier than expected.

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