Chinese inflation data dump fails to move needle in markets awaiting US CPI

The Chinese inflation data dump arrived as follows:

  • China July CPI +2.7% YoY (Reuters poll +2.9%).
  • CPI China July +0.5% compared to the previous month (Reuters poll +0.5%).
  • China reports July food CPI up 6.3% from a year ago; Non-food CPI +1.9%
  • China July PPI +4.2% compared to a year ago (Reuters poll +4.8%).
  • China July PPI -1.3 pct from previous month.

Producer inflation is expected to ease in July given the reversal in commodity prices, but weak household demand should limit pressure on consumer inflation, analysts said. Westpac.

Meanwhile, Wu Chaoming, vice dean of the Finance and Information Research Institute, believes that even if there is a slight possibility of lowering the reserve rate and interest rate at the coming. This is due to the influence of factors such as the Sino-US interest rate differential which will remain inverted for a long time, the pressure of stabilizing domestic prices and the lack of demand limiting the effect of monetary easing.

“Given that inflationary pressure is expected to pick up in the third and fourth quarters and that other major economies may continue to maintain the basic policy stance of raising interest rates, the possibility of an overall decline in rate and a reduction in the RRR in the second half of the year is low, but the loan market quoted rate (LPR) remains unchanged.”

AUD update

As a result of the data, the Aussie is flat on the data. markets await US inflation data.

“The market must decide whether the slowing stock is more important than the sticky, strong core,” analysts at TD Securities said. ”The USD remains sensitive to US data surprises. “We will focus in the short term on whether this number shakes up resilient risk sentiment, as this will also help inform USD price action in the short term.”

If the US Dollar manages to find a bid on today’s US inflation data, the decline in AUD/USD could play out as follows:

AUD/USD H4 chart

About the Consumer Price Index

The consumer price index is published by the National Bureau of Statistics of China. It is a measure of retail price changes within a representative basket of goods and services. The output is a comprehensive summary of the results extracted from the Urban Consumer Price Index and the Rural Consumer Price Index.

The purchasing power of the CNY is dragged down by inflation. The CPI is a key indicator for measuring inflation and changing buying trends. A substantial increase in the consumer price index 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 risk fiscal policy. 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.

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