When is China CPI/PPI data and how could they affect AUD/USD?
China CPI/PPI overview
Early on Thursday around 01:30 GMT, the market sees December 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 4.5% to 4.7% with PPI YoY likely recovering to -0.4% versus -1.4% earlier. On a MoM basis, CPI bears the forecast to flash a 0.3% gain against 0.4% previous rise.
Additionally, Australia’s Trade Balance numbers, expected 5915M versus 4502M prior, for November will also be out at 00:30 GMT and could give direction to the AUD/USD pair.
While likely recovery in China’s inflation numbers and domestic trade data could help the Aussie, the current trading sentiment surrounding US-Iran and US-China issues might keep the downside pressure on the quote.
TD Securities follow the market consensus of upbeat readings:
We expect CPI to push higher in December to 4.8% y/y from 4.5% y/y, previously. Pork prices are likely to continue to keep CPI elevated on a y/y basis due to the impact of African Swine Disease. Higher overall inflation is unlikely to dissuade PBoC from further targeted easing, especially as ex-food inflation is likely to remain benign. We anticipate an A$3.8b trade surplus for Nov, which is below the A$4.2b surplus consensus. Driving our below market forecast is a 1% drop in exports on a likely decline in iron ore exports while imports should pick up by roughly 1%. The monthly trade surplus has been steadily declining since peaking in June last year.
Analysts at Westpac also have their own say about data:
China releases Dec CPI and PPI data at 12:30 pm Syd/9:30 am local. Headline CPI hit 4.5%yr in Nov, a high since Jan 2012, but with food prices up 19.1%yr (pork 110.2%yr). CPI ex-food is just 1.0%. Consensus for Dec is 4.7%yr, with producer prices seen -0.4%yr. Much of the sharp improvement in the trade position has been due to resources exports but the weak A$ has also helped services exports, while soft domestic growth has kept a lid on imports. The surplus peaked at a record-smashing A$7.9bn in Jun 2019, slipping to A$4.5bn in Oct. The median forecast for Nov is $4.1bn, with Westpac on $4.3bn.
How could it affect the AUD/USD?
CPI and PPI numbers from Australia’s largest customer will undoubtedly affect the AUD/USD moves and so does the domestic trade data. However, the market’s positive reaction could be compressed amid the present cautious trade sentiment.
Should the scheduled data please Aussie buyers with upbeat readouts, AUD/USD could justify the latest bullish candlestick formation on the daily chart while pushing the quote towards a 200-day SMA level of 0.6895 and then to 0.6900 mark.
Alternatively, disappointments from the figures might have an immediate negative impact that can drag the Aussie pair further down towards December 18 low, near 0.6838.
It’s worth mentioning that the market may pay less attention to data in a case of surprise action by either the US or Iran. Additionally, trade headlines from the Trump administration or Beijing also have a higher ability to move the Aussie.
Key Notes
AUD/USD seesaws near 0.6870 after Wednesday’s Doji, eyes on Aussie/China data
AUD/USD Forecast: Consolidating losses, risk skewed to the downside
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.
About Australia Trade Balance
The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.