Talking Points:
- AUD/USD little changed after Chinese CPI crosses the wires
- Consumer inflation grew 2.3% y/y versus 1.8% y/y expected
- Markets likely dubious of further easing, ECB rate coming up
Losing money trading the Australian Dollar? This might be why.
The Australian Dollar showed a tepid reaction after China’s February inflation figures crossed the wires. Consumer prices increased 2.3 percent (YoY) versus the +1.8 percent (YoY) estimate and January’s +1.8 percent growth. This marks the fastest increase in CPI since June 2014. Meanwhile, wholesale inflation decreased 4.9 percent (YoY), in line with expectations and slower than the 5.3 percent contraction in January.
A lackluster response from the Aussie Dollar may have been due to the markets failing to see the data leading to further easing from the People’s Bank of China. Last week, Chinese policy makers announced a 3 percent price growth target for 2016 at the beginning of this year’s NPC meeting. Currency Strategist Ilya Spivak said that the implications of additional stimulus from China have failed to excite the markets and that this hints that investors are dubious about officials’ ability to be effective.
Later today, the European Central Bank will conduct its March interest rate decision. The markets are expecting the ECB to cut the deposit facility rate to -0.4 percent from -0.3 percent. As Currency Strategist Ilya Spivak noted, a disappointment from the ECB to meaningfully exceed market expectations will likely drag the sentiment-linked Australian Dollar lower.
