When is China CPI/PPI data and how could they affect AUD/USD?
China CPI/PPI overview
Early Tuesday, around 01:30 GMT, the market sees October 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 recede from 1.7% to 0.8% on a yearly basis with PPI YoY likely bouncing off -2.1% to -2.0%. On the MoM basis, CPI bears the forecast to remain static around 0.2%.
AUD/USD traders will closely watch the inflation data from Australia’s largest customer to challenge the latest pullback from a two-month high.
Ahead of the data, TD Securities says,
We expect a further moderation in China's CPI in Oct to 0.7% y/y (cons 0.8%) from 1.7% in Sep. A high base in Oct 2019 and a sharp decline in pork prices, both bode well for a sharper decline in inflation this month. At the same time PPI is likely to remain in deflation for a 9th straight month on a y/y basis. Looking ahead we expect the soft path of inflation to continue in China over the months ahead. None of this will likely alter the path of monetary policy, however, with chances of any further easing now having receded sharply.
Westpac follows the suit while saying,
The market anticipates that the PPI will continue to contract in October (market forecast: -1.9% YoY). Meanwhile, the October CPI should moderate in the face of decelerating food price growth and sluggish underlying inflation (market forecast: 0.8% YoY).
How could they affect the AUD/USD?
As trading sentiment dwindles after the recent market optimism, mainly backed by the coronavirus (COVID-19) vaccine hopes, AUD/USD buyers seek upbeat inflation data to restore the upward trajectory towards the yearly high marked in August. However, any major disappointment will join the trade war headlines, concerning the US and China, to exert additional downside pressure on the quote.
Technically, the mid-September high near 0.7350 offers an immediate upside barrier for the AUD/USD buyers while the current selling can aim for the early-October peak surrounding 0.7245. It’s worth mentioning that the pair stays mostly unchanged while taking rounds to 0.7280 during the early Asian session on Tuesday.
Key Notes
AUD/USD extends losses below 0.7300 amid mixed signals, eyes China CPI
AUD/USD Forecast: Consolidating near 0.7300
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.