When is China CPI/PPI data and how could they affect AUD/USD?
|Early Monday around 01:30 GMT, the market sees January month headline inflation numbers from China, namely the Consumer Price Index (CPI) and the Producer Price Index (PPI). China’s annualized CPI reading is expected to rise from 4.5% to 4.9% with PPI YoY likely recovering to +0.1% versus -0.5% earlier. On an MoM basis, CPI bears the forecast to flash a 0.8% gain against 0.0% prior
Even if the Lunar New Year holidays in China could dilute the importance of inflation numbers, traders will seek clues of how the coronavirus has impacted the price pressures. The Australian dollar is considered a proxy for China's risk.
TD Securities follow the market consensus of upbeat readings:
We expect CPI to rise to an annual rate of 4.8% y/y, largely due to seasonal factors. China's inflation has been severely impacted by the impact of African Swine Disease, leading to a major ramp-up in food prices, in particular pork. However, pork prices are moderating (-5.6% m/m in Dec) and this will likely continue in January. Lower oil prices will also help to dampen price pressure. However, the main imponderable is how the impact of 2019 n-Cov will impact inflation, but the impact of this is likely to be seen more in next month's data.
Analysts at Westpac also have their own say about data:
“China headline CPI is expected to remain elevated by food prices in January, with consensus 4.9% YoY, a high since 2011.”
How could it affect the AUD/USD?
CPI and PPI numbers from Australia’s largest customer will undoubtedly affect the AUD/USD moves. However, the market’s positive reaction could be compressed amid the present risk-off.
Should the scheduled data please Aussie buyers with upbeat readouts, AUD/USD could bounce off the decade low towards 0.6700. However, November 2019 low near 0.6755 will keep challenging the bears afterward. Alternatively, disappointments from the figures will keep the sellers directed towards 0.6600 round-figure.
It’s worth mentioning that the market may react with less strength in a case of surprise upside while disappointments could have higher reactions.
Key Notes
AUD/USD gaps down to refresh multi-year low near 0.6660, eyes on China CPI
AUD/USD Forecast: At its lowest in over a decade
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 excessive, 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.
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