Weak Inflation Data Restored Market Expectations To Neutral

The RMB exchange rate against the US dollar narrowed after a narrow fluctuation, but most of the day fluctuated on the devaluation side. The early April inflation figures were weaker than expected, bringing optimism to yesterday's trade data. Market supply and demand Generally, it tends to be balanced, and the fluctuation interval is narrowed obviously, and the volume also shrinks.

One Foreign investment bank Traders said that in April, the CPI was unsatisfactory and worried about the strength of the domestic economic recovery. "The improvement of exports in April is mainly driven by the strong demand in Europe and America. Although the renminbi will still be strong in the second half of this year, the short-term trend needs to be observed in domestic economic data."

Liu Dongliang, a senior analyst at China Merchants Bank (600036, stock bar), said that in April, the consumer price index rose 1.8%, or less than the average market expectation. exchange rate On the whole, the renminbi will still be in a weak trend, and a substantial appreciation may not be very significant unless the future trade data are very strong.

China's price data released on Friday were lower than market expectations. In April, CPI rose to a low of 18 months, and PPI also suffered negative growth for twenty-sixth consecutive months.

In the global market, the euro continued to fall in the European market on Friday. After the European Central Bank President Delagi put forward a strong wording, the euro rose to a two-and-a-half high.

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The US dollar to the central parity of RMB in April 25th week after a steady return of the new high since mid September last week, continued stable trend last week. As of last Wednesday, the middle price recorded 6.1580, a slight increase of 0.01% over the previous week. While the middle price was flat, the US dollar index continued to decline before the US dollar against the yuan. The spot exchange rate rose against the market and opened the gap with the US dollar again. As for the smooth trend of the central parity for several weeks, we think there are two possibilities: 1., the central bank believes that the depreciation rate of RMB has been in place; 2., in the context of the continued weakening of the US dollar index, the central bank has temporarily slowed down the pace of RMB depreciation. If it is the former, the renminbi may face short-term appreciation, but the possibility of going back to 6.1 near the beginning of the year or even going down is very small.

If it is the latter, it is likely that the dollar will continue to depreciate slightly after the dollar's decline. After all, the US nonfarm data released on Friday are much better than expected, believing that the US dollar is unlikely to continue to fall sharply. But the possibility of a sharp rise in the US dollar in the short term is also small, because the US job market is still facing the problem of falling labour force participation and wage stagnation, and the US inflation level has not reached the Fed's expected goal. It is believed that the US dollar will continue to raise interest rates for a long time, so the US dollar is likely to continue to oscillate in the near future. Under this assumption, the renminbi is likely to remain volatile with the US dollar.

From the forward exchange rate, the US dollar forward rate in the near future declined sharply compared with the level in the previous 2 and March. Last Wednesday (April 30th), there was a phenomenon of long-term premium. This shows that the market is not optimistic about the continued rise in spot exchange rate, that is, the continued depreciation of the RMB. From the distribution bias of the US dollar to the RMB exchange rate (on behalf of market sentiment), the current value has dropped sharply after reaching the overbought level in the early stage. Although it is still in the "bull market (bull market in the US dollar to RMB exchange rate)", the value has reached the 0 value and the mean value. This shows that the market sentiment is basically neutral, and there is no clear judgement for the latter market, which is exactly corresponding to the current slowing down of the RMB depreciation rate.