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  • AUD/USD remains bid despite China’s PPI falling by 1.2% in September.  
  • The PBOC has less room to deliver stimulus due to the elevated CPI.  

AUD/USD continues to trade in green even though the data released soon before press time showed China’s Producer Price Inflation or factory gate prices declined in September.  

The PPI came in at -1.2%, as expected, having dropped by 0.8% in August. The PPI is one gauge of corporate profitability and the contraction indicates the investment and employment have come under pressure, possibly due to the ongoing trade war with the US.  

Even so, the AUD, a proxy for China, is showing resilience. The AUD/USD pair is currently trading at session highs near 0.6785, representing modest gains on the day. The currency pair has barely moved following the release of China’s inflation data.  

The PPI data will likely stoke deflation worries, putting pressure on the People’s Bank of China (PBOC) to deliver more stimulus. The central bank, however, may have a tough time delivering stimulus due to elevated consumer prices.  

The consumer price inflation for September came in at 3%, beating the forecast of 2.9% rise and up from the preceding month’s 2.8% reading.  

As a result, the AUD could come under pressure during the day ahead, especially if the equities respond negatively to the dismal PPI reading.  

Technical levels