China: April CPI grows 3.3% YoY versus 3.7% expected

China April Producer Price Index and Consumer Price Index were both expected to soften, with producer prices slipping further into deflation. The data arrived as follows:

China CPI / PPI

China April PPI -3.1% YoY (Reuters poll -2.6%).
China April CPI +3.3% YoY (Reuters poll +3.7%).

AUD/USD reaction

AUD/USD was already lower on the news of trade wars – more on that here: Australian beef processors suspended in China trade escalation. AUD/USD is grounding at the lows on the data, a muted reaction so far. AUD/USD trades at 0.6447 post data. 

Description of 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.