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

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

China CPI/PPI overview

China’s annualized CPI reading is expected to increase to 2.7% from 2.53% with PPI YoY likely declining to 0.6% from 0.9%. On an MoM basis, CPI bears the forecast to flash 0.0% mark against 0.1% previous rise.

Recently mixed readings from China and its trade stalemate with the US highlights the importance of inflation data from Australia’s largest customer.

Westpac says inflation offers fewer barriers for China’s loose monetary policy as its latest report mentioned:

Inflation is no barrier to looser monetary policy in China (the currency is a different story), so there should be only moderate interest in May consumer and producer prices (11:30 am Syd/9: 30 am local). The median forecast is 2.7% yr on CPI and 0.6% yr on PPI.

How could it affect the AUD/USD?

CPI and PPI numbers from its largest customer will affect the AUD/USD moves as they should. The increase in trade balance and mixed PMI numbers, coupled with questions to domestic consumption amid disappointing imports, puts a higher emphasis on today’s inflation numbers.

Should Chinese data please Aussie buyers with upbeat readouts, AUD/USD can quickly cross 50-day simple moving average (SMA) level of 0.7015 while aiming 0.7050 and 100-day SMA level of 0.7065.

Alternatively, disappointment from data might not hesitate to reprint 0.6940 on the face of the Aussie while 0.6900 and 0.6860 are holding the door for January 2016 low near 0.6820 during further declines.

Key Notes

AUD/USD clings to 0.6960 as traders await RBA’s Kent, China CPI for fresh clues

AUD/USD analysis: flat below 0.7000

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.