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

China CPI/PPI overview

Early Wednesday around 01:30 GMT, the market sees May 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 drop from 3.3% to 2.7% with PPI YoY likely declining to -3.3% versus -3.1% earlier. On the MoM basis, CPI bears the forecast to recover from -0.9% previous readouts to -0.5%.

Even if the market’s cautious sentiment amid the pre-Fed session restricts the AUD/USD pair moves, top-tier data from the key customer always becomes important to watch for the traders. The headline inflation figures from the dragon nation are bearing the downbeat forecast and likely to print the third back to back fall, which in turn becomes the cause of concern for the Aussie pair traders.

TD Securities follow the market consensus of downbeat readings:

On a sequential basis, CPI is likely to decline for a third consecutive month and we look for a 0.6% m/m, 2.7 y/y reading from 3.3% y/y previously. May is a seasonally weak month for CPI and this month downward pressure on prices will have been even greater. Prices for food led by Pork and transportation will likely continue to exert a negative influence on inflation, though we expect the downward momentum for both to fade over the next few months. Ongoing deflationary pressures will likely lead to further monetary easing, with RRR, MLF and LPR cuts in store.

Westpac also holds downbeat expectations from data while saying, “May CPI is expected to moderate (market f/c 2.7%yr), and PPI is set to slip further into the deflationary territory (market f/c -3.3%yr).”

How could they affect the AUD/USD?

Considering the AUD/USD pair’s latest declines, coupled with downbeat expectations from China’s key inflation data, bulls are less likely to return unless witnessing an extremely positive outcome. On the contrary, sluggish CPI will add to the pair’s weakness during the pre-Fed cautious session.

Technically, the pair’s failure to sustain the upside break of 0.7000 seems to drag it towards the early-January low near 0.6850 and February month’s high of 0.6775. However, the 200-day SMA level of 0.6664 might restrict the pair’s additional downside. On the contrary, a clear break above 0.7000 will have to cross the latest top near 0.7045 ahead of targeting July 2019 peak surrounding 0.7085.

Key Notes

AUD/USD looks for a firm direction below 0.7000 ahead of China inflation data

AUD/USD Forecast: Corrective decline could accelerate once below 0.6860

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.