Chinese CPI higher than expected, 2.7% vs 2.6%

China: PPI and CPI data for July has arrived as follows:

• China July CPI +2.7% YoY (Reuters poll +2.6%).
• China July PPI -2.4% YoY (Reuters poll -2.5%)..

AUD was unchanged on the release.

Moreover, the AUD is “broadly consistent with its fundamental determinants” as the Reserve bank fo Australia has stated.

The US dollar can correct, but it will not be an easy task to take the Aussie lower when the Bank’s “pain threshold “ for the AUD is some way off still.

The Consumer Price Index

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 purchasing 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.