The world’s two largest national economies report inflation this week. CPI changes reports are expected to be the next major risk after the US Congressional Elections. China’s prices data will be released tomorrow. It is likely that the US figures will have the largest impact on the markets. However, China’s expectations fluctuate and could impact commodity currencies as well future inflation expectations.
Why it matters: China data
The PBOC maintains a strict control over the Chinese currency. Due to the significant impact of covid actions since the beginning, the central bank has adopted a more accommodating stance. The yuan has naturally declined over this time. China is the world’s largest importer of goods and services. It would be expected that this would translate into higher domestic prices.
On the flip side, a weaker Yuan can mean that Chinese exports are more affordable for foreign buyers. This could help to reduce global inflation concerns. The yuan could become stronger if inflation increases and the PBOC tightens policy. This might be positive for commodity currencies, but could imply higher inflationary pressures for China’s…