USD/CNH weakens 0.4% as China deflation persists despite trade hopes

USD/CNH declined 0.4% to 7.2850 during Asian trading as China's persistent deflation concerns weighed on the yuan, even as markets anticipate potential positive outcomes from US-China trade talks in London. Latest data confirms China remains trapped in deflationary pressures, with consumer prices continuing to contract, raising concerns about domestic demand weakness. This economic backdrop complicates Beijing's negotiating position in trade discussions, potentially limiting their flexibility on tariff concessions. The yuan's weakness reflects dual pressures from domestic economic challenges and uncertainty over trade negotiations. Technical analysis shows USD/CNH approaching key support at 7.2800, with a break below potentially accelerating yuan gains if trade talks yield positive results. However, continued deflation data could limit any sustained yuan appreciation, keeping the pair elevated above 7.2500 in the near term.