When is China CPI/PPI and how could they affect AUD/USD?

Early on Tuesday around 01:30 GMT, the market sees headline inflation numbers from China, namely the consumer price index (CPI) and the producer price index (PPI) figures for August month.

China CPI/PPI overview

China’s annualized CPI reading is expected to decline from 2.8% to 2.6% with PPI YoY likely dipping further down to -0.9% versus -0.3% earlier. On an MoM basis, CPI bears the forecast to flash 0.5% gain against 0.4% previous rise.

TD Securities follow the market consensus of a soft CPI number while saying:

"We expect CPI to soften slightly to 2.7% y/y from 2.8% y/y previously, but this is attributable to base effects (higher base in Aug 18) rather than any softening in inflation pressures. Indeed we expect a high monthly CPI gain of 0.58% m/m. Once again food prices will be the culprit, with prices rising 9.1% y/y in July and likely to remain elevated in August given the surge in pork prices. Excluding food, inflation is much better behaved and has actually decelerated over recent months."

How could it affect the AUD/USD?

CPI and PPI numbers from Australia’s largest customer will undoubtedly affect the AUD/USD moves. However, recently sluggish data from the dragon nation have pushed it further towards more easy money policy, as inferred from the People’s Bank of China’s (PBOC) latest commitment, which in turn favors commodity basket at large.

Should Chinese data please Aussie buyers with upbeat readouts, AUD/USD could rise further towards 0.6905/10 key resistance area including 100-day simple moving average (SMA) and July 10 low, a break of which could propel the quote to 0.6960 and 0.7000 numbers to the north.

Alternatively, disappointment might have an immediate negative impact that drags the Aussie pair below 50-day SMA level of 0.6860 towards June month low of 0.6830. Though, expectations of further easing from China, due to weak data, might reimburse the losses unless any negative erupts from the US-China trade frontier.

Key Notes

AUD/USD takes the bids to 5-week high ahead of Australia/China data

AUD/USD Analysis: bullish case to be firmer once above 0.6880

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 excesive, 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.