When is China CPI/PPI data and how could they affect AUD/USD?
China CPI/PPI overview
Early Wednesday around 01:30 GMT, the market sees August month headline inflation numbers from China, namely the Consumer Price Index (CPI) and the Producer Price Index (PPI). China’s annualized CPI reading is expected to recede from 2.7% to 2.4% with PPI YoY likely bouncing off -2.4% to -2.0%. On the MoM basis, CPI bears the forecast to ease from 0.6% to 0.4%.
Although the latest data from China have been positive, the market’s current risk-off mood, coupled with the US dollar’s run-up, pushes the AUD/USD bears to look for downbeat prints, which in turn highlights the inflation data from Australia’s largest customer.
Ahead of the data, TD Securities says,
We expect CPI to fall to 2.6% y/y in Aug from 2.7% y/y in the previous month. Pork prices have been a key contributor to higher CPI over recent weeks and in August prices continued to move higher, albeit at a slower pace than last month. While this may exert further upside pressure on overall CPI a higher base in Aug last year, will help limit the increase in y/y CPI. Core CPI is likely to remain benign as higher food prices have not made their way into underlying price pressures.
How could they affect the AUD/USD?
AUD/USD fades pullback from the two-week low, flashed on Tuesday, while easing to 0.7200 during the pre-data period on Wednesday. The quote dropped heavily the previous day as the market’s risk-off mood helped the US dollar index (DXY) to print a six-day winning streak while attacking a four-week top. Although risk catalysts keep the driver’s seat off-late, any deterioration of the key inflation data from the largest customer adds worries for the pair buyers. On the contrary, upbeat outcomes may offer only a knee-jerk reaction amid the broad gamut of negative catalysts.
Technically, a clear break below the 10-week-old support line, at 0.7228 now, drags the AUD/USD prices towards 0.7135-34 support confluence including 50-day SMA and August 20 lows.
Key Notes
AUD/USD: Bears eye two week low near 0.7200 amid risk-off mood
AUD/USD Forecast: Nearing a critical support level at 0.7170
About China CPI
The Consumer Price Index is released by the National Bureau of Statistics of China. It is a measure of retail price variations within a representative basket of goods and services. The result is a comprehensive summary of the results extracted from the urban consumer price index and rural consumer price index. The purchase power of the CNY is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A substantial consumer price index increase would indicate that inflation has become a destabilizing factor in the economy, potentially prompting The People’s Bank of China to tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative (or Bearish) for the CNY.
About China PPI
The Producer Price Index released by the National Bureau of Statistics of China is a measurement of the rate of inflation experienced by producers. It captures the average changes in prices received by Chinese domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Changes in the PPI are widely considered as an indicator of commodity inflation. If the Producer Price Index increase is excessive, it would indicate that inflation has become a destabilizing factor in the economy, The People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, whereas a low reading is seen as negative (or bearish) for the CNY.