USD/CNH edges lower to near 7.2090 amid a softer-than-expected Chinese CPI

• USD/CNH attempts to retrace its recent gains on the subdued US Dollar.
• Chinese CPI declined by 0.8% YoY against the expected 0.5% decline.
• Fed members’ comments suggest to keeping interest rates elevated until inflation sustainably returns to the 2% target.

USD/CNH remains in the negative territory after trimming the intraday losses on Thursday. USD/CNH pair trades lower near 7.2090 during the Asian trading hours. However, the People’s Bank of China (PBoC) set the USD/CNY central rate at 7.1063 as compared to 7.1911 Reuters estimates.

In January, the Chinese Consumer Price Index (CPI) experienced a month-on-month growth of 0.3%, which was slightly below the expected 0.4%. However, this figure represented an improvement from the previous reading of 0.1%. On an annual basis, the CPI declined by 0.8%, surpassing the anticipated decline of 0.5% and the previous decline of 0.3%. Meanwhile, the Producer Price Index (PPI) on a year-on-year basis declined by 2.5%, which was slightly lower than the expected 2.6% decline.

US Dollar (USD) faces challenges due to the risk-on sentiment despite the hawkish stance taken by the Federal Reserve (Fed) to keep interest rates higher for quite some time, which, in turn, weighs on the USD/CNH pair. In a press conference post-interest rate decision on January 31, Fed Chair Jerome Powell rejected the idea of a rate cut in March and committed to monitoring inflation to ensure its sustainable return to the 2% target.

Additionally, in her address to the Boston Economic Club, Fed Boston President Susan Collins hinted at the potential for rate cuts later in the year if the economy aligns with expectations. Meanwhile, Federal Reserve Governor Adriana Kugler expressed satisfaction with the significant progress on inflation during remarks made on Wednesday, conveying optimism about the sustainability of this positive trend.