The USDCNH pair leveled at 7.17 per dollar, reacting mildly to new Chinese economic data for December. This information revealed ongoing deflation in China, with declines in consumer and producer prices of 0.3% and 2.7%, respectively. Despite a higher-than-expected trade surplus, driven by strong exports, the yuan stayed close to its one-month low.
Traders expect more support measures from authorities soon to combat deflation and uncertain recovery post-pandemic. Markets anticipate cuts in key lending rates and another reduction in the reserve requirement ratio in the first half of the year. Attention is now on next week’s Chinese GDP figures for additional insights.