Will China Tighten?

Chinese economic data released last night, has investors speculating that a rate hike may come as early as tomorrow. A strong economic performance and a stronger than expected inflation number increased the odds.

A decision to hike by China would dampen the risk trade and benefit the U.S. Dollar. The Aussie and other commodity currencies have been sold across the board as traders liquidate some exposure.

China’s consumer price index (CPI) rose 2.7%, year-over-year in February and the producer price index PPI rose 5.4% y/y. This is compared to 1.5% y/y and 4.3% y/y, respectively, in January. China currently has a 3.0% year-over-year target, which is expected to maintain.

Tightening is not a certainty — yet — and analysts are divided in the matter. Carl Weinberg, for example, told Blooomberg news he is not worried. (Video below)