AUD/USD keeps losses after below-forecast China factory-gate inflation

• AUD/USD remains in the red post-below-forecast China CPI and PPI readings.  
• The drop in the CPI means the PBOC has more room to stimulate the economy. The risk assets, therefore, could cheer the decline in the CPI, capping the downside in the Aussie dollar.  

The Aussie dollar is extending losses as China’s factory-gate inflation released soon before press time highlighted growing pressure on the world’s second-largest economy.  

The producer price index (PPI) or factory-gate inflation, a measure of the prices businesses receive for their goods and services, rose 0.9 percent in December from a year earlier, compared with a 2.7 percent increase in November. Meanwhile,   the consumer price index (CPI) also ticked lower to 1.9 percent from 2.2 percent.  

The moderation in PPI is indeed bad news for commodities and commodity dollars like the AUD. However, with cooling consumer inflation, the PBOC has more room to stimulate the economy. The risk assets, therefore, could pick up a bid, and cap downside in the Australian dollar.  

As of writing, the AUD/USD is trading at 0.7154, having hit a session low of 0.7146 post-PPI release.  

AUD/USD Technical Levels