When is China CPI/PPI data and how could they affect AUD/USD?
|China CPI/PPI overview
Early Tuesday around 01:30 GMT, the market sees February 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 drop from 5.4% to 5.2% with PPI YoY likely declining to -0.3% versus +0.1% earlier. On the MoM basis, CPI bears the forecast to slip from 1.4% to 0.8%.
Although coronavirus (COVID-19) risks to the Chinese economy have mostly been tamed off-late, its economic impacts are likely to remain for a quite long time. As a result, the AUD/USD pair traders will pay close attention to how price pressures at its largest customer are being affected due to the deadly virus.
TD Securities follow the market consensus of upbeat readings:
We expect CPI to fall to 5.2% y/y in Feb from 5.4% y/y in Jan. Seasonal factors were unfavorable in Feb, with prices higher due to the impact of the Chinese New Year holidays. However, this will be mitigated by a much higher base on Feb 19. Pork prices jumped in Jan, and in February COVID-19 could have a significant impact, with quarantines, transport restrictions and animal feed supply shortages likely to disrupt the food supply chain, keeping prices for many agricultural products elevated.
Analysts at Westpac also have their say about data:
February PPI is expected to decline by 0.3%yr in the absence of upstream price pressures (12:30 pm Syd/9:30 am local). On the other hand, February CPI should be sustained at an elevated level by food prices and is expected to print at 5.2%yr.
How could it affect the AUD/USD?
While a downbeat reaction to the Chinese inflation data is widely anticipated, traders will look for lesser than expected negative impacts of the COVID-19 to restore the trading sentiment. However, broad risk-tone will remain under pressure amid the outbreak in the US and Europe, which in turn can continue weighing on the market’s risk barometer AUD/USD.
Technically, buyers will look for entry beyond a sustained break of 21-day SMA, currently near 0.6630, while targeting early-February lows near 0.6660. Alternatively, 10-day SMA near 0.6580 acts as the immediate support ahead of 0.6500, 0.6460 and Monday’s low of 0.6311.
Key Notes
AUD/USD pressured below 0.66 handle and 2020's VPOC
AUD/USD Forecast: Technicals show positive signs but Aussie could suffer amid risk aversion
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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