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Aussie Dollar Inches Back After Chinese Inflation Numbers

Aussie Dollar Inches Back After Chinese Inflation Numbers

David Cottle, Analyst

Talking Points

  • Chinese consumer prices rose, but by less than the markets had expected
  • Producer prices, meanwhile, are forging ahead
  • Either way, it looks as though deflation is no longer much of a worry

The Australian Dollar rose a little on Tuesday after the release of a mixed official inflation picture out of China.

Consumer prices rose, but by a little less than the markets had been expecting. The Consumer Price Index was up by 2.1% on-year in December when the markets had been looking for a 2.3% gain which would have matched to November’s pace. Key food prices rose by 4.4%, but inflation in the non-food sphere was less strong, rising 2.2%.

The monthly rise was 0.2%, however, above the 0.1% clocked in November.

Factory gate prices rose far more strongly. Indeed, China’s Producer Price Index put in its strongest showing since September 2011, rising well ahead of expectations by 5.5%. The upshot of these numbers would appear to be that the spectre of deflation has been pretty comprehensively exorcised in the world’s second-largest national economy, with Beijing’s efforts at least in that direction paying off.

The Australian Dollar appeared to play its sometime role as the currency markets’ China proxy in the aftermath of the data. Previously put under a bit of pressure ‘at home’ by weaker than expected Australian retail sales, AUD/USD rose to 0.73492 in the aftermath of the Chinese numbers, from 0.73414 just before them.

Down, then back again: AUD/USD’s data morning

Aussie Dollar Inches Back After Chinese Inflation Numbers

Chart compiled using TradingView

As always DailyFX analysts have their cards on the table. Take a look at their first-quarter forecasts here.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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