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

China CPI/PPI overview

Early Monday around 01:30 GMT, the market sees July 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 rise from 2.5% to 2.6% with PPI YoY likely bouncing off -3.0% to -2.5%. On the MoM basis, CPI bears the forecast to reverse the previous -0.1% fall with a 0.4% reading.

With the recent US dollar recovery and downbeat prints of China’s Caixin Manufacturing PMI probing the AUD/USD buyers, inflation numbers from Australia’s largest customer become the key to watch. The headline inflation figures from the dragon nation are anticipated to end their deflationary pattern, which in turn becomes the cause of concern for the Aussie bulls.

Westpac conveys optimism from the day while saying, “PPI and CPI data for July (11:30 am Syd/9:30 am local) will show a continued absence of inflation risks, with consensus +2.6%yr on consumer prices, -2.5%yr on producer prices.”

How could they affect the AUD/USD?

AUD/USD extends Friday’s losses while taking rounds to 0.7155 during the pre-event Asian session on Monday. The Aussie pair’s latest weakness took clues from the US dollar surge and the coronavirus (COVID-19) woes that marked the biggest single-day death toll. While data from China have been good so far, wave 2.0 is feared to have larger negative repercussions and is left to portray its marks. As a result, any weakening in the key statistics could be important for sellers to firm-up the grip. On the contrary, upbeat figures are less likely to convince buyers for fresh entries unless being drastically positive.

Technically, the pair’s three failed attempts to stay past-0.7240 joins sluggish MACD on the daily chart to keep the bulls cautious unless it crosses the immediate upside hurdle. On the contrary, an ascending trend line from May 22, at 0.7115 now, followed by 0.7105-7100 area comprising 21-day EMA and 0.7100 round-figures, could keep the restricts the AUD/USD prices for a short-term.

Key Notes

AUD/USD: Kick-starts the week with little action under 0.7200, eyes China CPI

AUD/USD Forecast: Corrective decline could continue at the beginning of the week

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.