Despite conflicting indications from China's inflation, USD/CNH recovers to about 6.7700

The USD/CNH pair has rebounded after falling to approximately 6.7550 during the Asian session. Despite China's National Bureau of Statistics (NBS) publishing mixed Consumer Price Index (CPI) statistics for December, the asset has detected demand and extended its recovery to near 6.7700.

The annual CPI result has maintained at 1.8%, which is in line with predictions and higher than the previous announcement of 1.6%. While, the price index at the factory gate has declined significantly, indicating that producers have less bargaining leverage. The Producer Price Index (PPI) decreased by 0.7% versus expectations of a 0.1% decline.

The rapidity with which the Chinese government reopened the economy following an extended shutdown to tackle the Covid-19 outbreak has inspired hope among market investors. The street is predicted a vertical rebound in economic prospects and international trade.

Analysts at Morgan Stanley boosted their projection for China’s Gross Domestic Product (GDP) this year to above 5.0%. "If policy can eliminate hurdles to the housing/property sectors and recovery from COVID zero, China's economic recovery should solidify beginning in the second quarter of this year," they noted.

In the meantime, risk-sensitive assets are exhibiting strength due to investors' increased risk appetite, as evidenced by the S&P 500 futures' series of weekly gains. Positive market sentiment has pushed 10-year US Treasury rates lower to 3.55 percent. The US Dollar Index (DXY) has faced roadblocks at 102.80 and has swayed towards the south ahead of United States inflation data.

Wells Fargo analysts anticipate that another large decrease in energy costs will weigh on the headline and offset further price increases in food and core services. But the price fall should also be aided by another decline in core products, headed by secondhand automobiles once again.