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

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

China CPI/PPI overview

China’s annualized CPI reading is expected to increase to 2.5% from 2.3% with PPI YoY likely rising to 0.6% from 0.4%. On an MoM basis, CPI is forecast to reverse previous -0.4% contraction with a +0.1% gain.

Recently mixed data from China data and challenges to earlier likely trade deal between the US and China highlights the importance of inflation data from Australia’s largest customer.

TD Securities expect an increase in the CPI figure as their report says:

CPI rose to 2.3% y/y in March. We think that a lower base and the impact of African Swine Disease could push the rate of inflation higher in April to 2.5% y/y. Indeed, food prices (estimated to contribute around 10% to China’s CPI basket) are likely to increase further due to higher pork prices amid the worsening impact of African Swine Disease.

How could it affect the AUD/USD?

Although major market attention is likely to be on the US-China trade talks, CPI and PPI numbers from its largest customer will affect the AUD/USD moves. The decline in trade balance and a surge in PMI numbers, coupled with questions to domestic consumption amid higher imports, puts a higher emphasis on today’s inflation numbers.

Should Chinese data please Aussie buyers with upbeat readouts, AUD/USD can quickly rise through 0.7055 and aim for April highs near 0.7070 while 100-day and 200-day simple moving averages (SMA), at 0.7110 and 0.7170 respectively, might flash on the bulls’ radar afterward.

Alternatively, disappointment from data might not hesitate to reprint 0.6980 on the face of the Aussie while 0.6960 and 0.6920 holding the door for January 2016 low near 0.6820 during further declines.

Key Notes

AUD/USD: A shade lighter than 0.7000 ahead of China inflation, US-China trade talks

AUD/USD technical analysis: Aussie dwindling to daily lows below the 0.7000 figure

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.