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

China CPI/PPI overview

Early Thursday around 01:30 GMT, the market sees June 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 recover from 2.4% to 2.5% with PPI YoY likely bouncing off -3.7% to -3.2%. On the MoM basis, CPI bears the forecast to reverse the previous -0.8% fall with a 0.0% reading.

Even if the broad US dollar weakness, gains in equities and recovery in China data have helped the AUD/USD pair to remain strong near the monthly top off-late, traders remain cautious of further upside ahead of the key price pressure data from the largest customer. The headline inflation figures from the dragon nation are anticipated to end their deflationary pattern, which in turn becomes the cause of concern for the Aussie bulls.

TD Securities follow the market consensus of upbeat readings:

We expect CPI in June to remain at 2.4%, the same as in the previous month. Food prices have moderated over recent months as pork prices continue to correct lower. We expect a similar pattern for June. However, transport prices are likely to end their deflationary trend. Despite ongoing disinflationary forces, PBoC has been reluctant to ease over recent weeks. We expect this pause to end soon, with further, albeit gradual and targeted easing in the pipeline.

Westpac also conveys optimism from the day while saying, Final demand remains weak and the market expects this to be reflected in producer price inflation for June (prior: -3.7%/yr, market f/c: -3.2%). Consensus estimates also predict a slight improvement in consumer price inflation, from 2.4%/yr to 2.6%.

How could they affect the AUD/USD?

With the AUD/USD pair near to the strong resistance, marked in June, despite the coronavirus (COVID-19) woes at home, traders will seek downbeat readings to portray another U-turn below 0.7000 threshold. On the contrary, upbeat prints will suggest China’s broad recovery moves from the pandemic, also considering the latest rise in PMIs,  which in turn will help the bulls overcome June month’s peak near 0.7065.

Technically, the pair’s sustained trading beyond a confluence of 21-day SMA and an upward sloping trend line from May 15, around 0.6910/05, keeps it on the bulls’ radars. However, buyers remain cautious considering multiple failures to cross 0.7000, a break of which could escalate the north-run to attack June month’s high of 0.7065, followed by July 2019 peak close to 0.7085 and 0.7100 round-figures.

Key Notes

AUD/USD: Bulls keep the reins with eyes on 0.7000 ahead of China CPI/PPI

AUD/USD Forecast: Aussie benefits from better market mood, remains capped by 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 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.