China CPI and PPI data missing expecations, AUD under pressure

China’s price pressures for both producers in the PPI (prior: -2.0%, market f/c: -1.8%) and consumers in the CPI (prior: 2.4%, market f/c: 1.9%) have been released as follows:

Chinese CPI

• China September CPI +1.7 pct from a year ago (Reuters poll +1.8 pct).
• China September CPI +0.2 pct from previous month (Reuters poll +0.3 pct).
• China says September food CPI +7.9 pct from a year ago; non-food CPI 0.0 pct.

Chinese PPI

• China September PPI -2.1 pct from a year ago (Reuters poll -1.8 pct).
• China September PPI+0.1 pct from the previous month.

AUD/USD update

AUD/USD fell 0.57% at its lowest point in the Asian session on Thursday, to 0.7128 on the back of comments from the Reserve Bank of Australia governor Philip Lowe, fanning the rate cut hopes.

Lowe said that the budget strategy was right but warned that it is possible to cut rates down to 10 bps.

• Breaking: AUD/USD drops through key trendline support in a 0.57% move on RBA Lowe

• Aussie Unemployment Rate +6.9 % vs +7.1% expected, AUD still under pressure

The combination of an Employment report disappointment as well as imminent rate cut expectations, AUD/USD is under pressure:

 AUD/USD Price Analysis: Bears on the move to break key trendline support

Weekly chart

The weekly chart illustrates that wave-3 is already on its southerly course and is expected to fill in the monthly wick in an extension of the dominant bearish trend and monthly correction towards a 38.2% Fibonacci retracement.

Description of the Consumer Price Index

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.