AUD/USD drops to near 0.7430 as China’s CPI lands at 1.5%

The AUD/USD pair as China’s National Bureau of Statistics has reported the yearly Consumer Price Index (CPI) at 1.5%. The yearly CPI has come higher than the previous print and street expectations of 0.9% and 1.2% respectively.

While, yearly China’s Producer Price Index (PPI) has landed at 8.3%, has outperformed the expectation of 7.9% but has remained lower than the previous print of 8.8%.

This is going to restrict the People’s Bank of China (PBOC) from adopting a loosened monetary policy. It is worth noting that the PBOC has kept the interest rates unchanged at 3.7% for the last two months. The PBOC reduced its loan prime rate (LPR) by 10 basis points (bps) in January. Australia, being a more exporter to China has a proportional relationship with Chinese policies. Higher inflation print may reduce the expectations of loosened monetary policy, which will impact the antipodean.

Earlier, the asset plunges after printing yearly highs at 0.7662 as the Reserve Bank of Australia (RBA) kept its policy unchanged on Tuesday. An unchanged monetary policy and a less-dovish stance by the RBA were highly expected by the market participants as inflation in the world economy is surging higher while the growth rate is not advancing proportionally.

Meanwhile, the US dollar index (DXY) looks to reclaim 100.00 after a negative opening gap on Monday. The DXY has rebounded sharply as investors are betting on the higher side of the inflation print and eventually, an elevated interest rate decision by the Federal Reserve (Fed) in May.