In January, China’s Producer Price Index (PPI) deflation is estimated to have eased to 1.5% year-on-year, attributed to month-on-month increases in metal and energy prices. The Consumer Price Index (CPI) inflation possibly decreased by 0.2 percentage points to reach 0.6% year-on-year during the same period due to base effects.<\/p>\n
The report estimates a 0.3% monthly increase in the PPI, driven by higher prices of metal and energy. Meanwhile, core CPI appears to have experienced a rise influenced by gold prices and seasonal factors.<\/p>\n
The official manufacturing Purchasing Managers’ Index (PMI) showed a minor decline, reflecting a cautious outlook amid ongoing geopolitical risks. This information was compiled by the FXStreet Insights Team, which gathers market observations and insights from commercial and external analysts.<\/p>\n
The easing of China’s producer price deflation to -1.5% in January is a critical signal for us. This suggests that the worst of the factory-gate price declines, which plagued the industrial sector throughout 2025, may be behind us. We should now position for a potential cyclical recovery in Chinese manufacturing and its global impact.<\/p>\n
This shift is largely driven by rising commodity prices, so our focus should turn to industrial metals and energy derivatives. With copper prices recently climbing above $9,800 per tonne on the LME for the first time this year, we are considering long positions through call options on copper futures. This move seems supported by a potential restocking cycle in China that could tighten the market further in the coming weeks.<\/p>\n
We are also reassessing Chinese equity indices, which faced significant headwinds last year. After the Hang Seng Index touched multi-year lows in the third quarter of 2025, this improving inflation data could provide a catalyst for a sustained rebound. We see opportunities in buying call spreads on indices like the CSI 300 to capitalize on a gradual recovery in corporate profits.<\/p>\n
The currency market will likely react, especially commodity-linked currencies. The Australian dollar has already strengthened to over 0.6700 against the USD, partly on the back of stabilized iron ore prices near $135 per tonne. We believe further signs of a firming Chinese economy could push AUD\/USD higher, making long positions in AUD futures or options an attractive strategy.<\/p>\n
However, we must remain cautious as the official manufacturing PMI for January came in at 49.7, still indicating a slight contraction. This suggests the recovery is fragile and not yet broad-based. Therefore, using defined-risk option strategies is prudent to protect against any setbacks or a slower-than-expected rebound in economic activity.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" China’s January PPI deflation eased to 1.5% as metal and energy prices rose monthly. CPI dropped.<\/p>\n","protected":false},"author":62,"featured_media":16962,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40849","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t