USD/CNY is likely a break above the YTD highs – TDS

Chinese annual CPI fell in July for the first time in 28 months. Economists at TD Securities analyze CNY outlook after the latest Chinese data.

China falls into deflation

China slipped into deflation for the first time since Feb 2021 with July CPI coming in at -0.3% YoY. Today's report highlights the economy faces subdued price pressures from weak economic demand, but the details don't point to an imminent risk of a deflationary spiral.

The divergence in data surprises between US and China is likely to act as a headwind for the Yuan and an anchor for the USD.

The path of least resistance for USD/CNY is likely a break above the YTD highs.