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China CPI/PPI overview

Early Friday at 01:30 GMT sees China’s latest Consumer Price Index (CPI) and Producer Price Index (PPI) figures for January month and the annualized CPI reading is expected to remain unchanged at 1.9% with PPI YoY likely declining to 0.2% from 0.9%, while the month-over-month CPI is forecast to tick up from 0.0% to 0.5% for the same month. Trade tensions between the US and China are dragging growth prospects lower, not just for China for the rest of the world. Also, continued slowdown for Chinese growth figures will bode poorly for overall market sentiment, threatening the Aussie due to China being their largest trading partner. Analysts at Westpac say:

China releases Jan consumer and producer price data at 12:30pm Syd/9:30am local. Consensus is for the CPI to hold at 1.9%yr while the energy price slide weighs further on PPI, to 0.3%yr from 0.9% in Dec.

How could it affect the AUD/USD?

While lack of uniform pattern from Australian and Chinese data, coupled with developments at the US-China trade negotiations, has been challenging the Australian Dollar (AUD), weakness in headline economics from its largest consumer can add downward pressure on to the AUD, also known as Aussie.

Should there be an uptick in headline inflation numbers, the AUD/USD pair may rise towards 50-day simple moving average (SMA) of 0.7145 ahead of targeting 0.7170 resistance level. In case extended rise past-0.7170, the 0.7220 and 0.7260 may gain market attention.

On the contrary, weak data can fetch the quote back to the recent low near 0.7050 whereas 0.7010 and 0.6980 can restrict the pair’s decline afterward.

Key Notes

AUD/USD: Whipped between 0.7071/31 on a Valentine’s Day mixed love affair with data surprises and trade negotiations

AUD/USD Technical Analysis: 0.7135-40 continues to limit the Aussie upside

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 excesive, 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.