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. The PPI was forecasted to rise 1.6 percent. Meanwhile,  the consumer price index (CPI) also ticked lower to 1.9 percent from 2.2 percent, missing the estimated print of 2.1 percent. 

The moderation in PPI is indeed bad news for commodities and commodity dollars like the AUD. However, with the 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, although as of writing, the S&P 500 futures are down 0.6 percent. 

At press time, the AUD/USD is trading at 0.7154, having hit a session low of 0.7146 post-PPI release. The Aussie dollar will likely revisit session highs near 0.7180 if the S&P 500 futures recover losses. 

AUD/USD Technical Levels