Talking Points:
- AUD/USD little changed after China released January inflation data
- CPI inflated 1.8 percent year-over-year versus +1.9 percent expected
- PPI deflated 5.3 percent year-over-year versus -5.4 percent expected
Losing Money Trading The Australian Dollar? This Might Be Why.
The Australian Dollar showed a limited response, dipping ever so slightly against its US counterpart after China released its consumer and wholesale inflation figures for January. The Consumer Price Index (CPI) increased 1.8 percent year-over-year (YoY) versus an estimated +1.9 percent (YoY). This marks a fourth consecutive month where prices increased from the prior period as well as the highest level since August 2015.
From the wholesale side, the Producers Price Index (PPI) deflated 5.4 percent (YoY) versus an expected contraction of 5.4 percent (YoY). This breaks a 4 month consecutive streak where wholesale expenses fell at the same rate of 5.9 percent (YoY). It also marks the slowest rate of deflation since July 2015.
The CPI figure was worse than expected which can lead the PBOC to take action by providing more stimulus. This could have been why the Aussie slightly declined as negative spillovers from China can affect RBA’s approach to setting interest rates. China is Australia largest trading partner. The move paled in comparison to the Aussie’s response to a disappointing jobs report from Australia an hour beforehand. Looking ahead, Currency Strategist Ilya Spivak pointed out that US CPI, which will be released on Friday, may hurt risk trends and the Aussie Dollar as Fed rate hike bets return.
