Australian Dollar Inches Up As China CPI, PPI Top Forecasts

Talking Points:

• China’s Consumer Price Index just beat forecasts in October
• The Producer Price measure did so more robustly
• But the Australian Dollar rose only a little and failed to claw back earlier losses

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The Australian Dollar ticked up very slightly Thursday as Chinese inflation data came in ahead of forecasts.

The October Consumer Price Index rise came in at 1.9% on the year, which was only slightly above the 1.8% gain expected. However, factory-gate prices saw sharper gains. The Producer Price Index rose by 6.9%, well above the 6.6% forecast. Pollution curbs may have reduced factory output last month, leading to higher prices

The Australian Dollar often acts as the foreign-exchange markets’ favourite liquid China proxy but its gains on these data were very marginal. AUD/USD had been knocked earlier by news of weaker than forecast Aussie home loans, and it certainly failed to recoup those losses on the Chinese numbers. Loan levels fell 2.3% on the month in September when investors had been hoping for a 2% gain.

On its broader daily candlestick chart, AUD/USD remains in the long downtrend from 2017’s September highs. This is understandable given that the Reserve Bank of Australia doesn’t look as though it is going to raise the Official Cash Rate from its 1.50% record low anytime soon. The US Federal Reserve is of course thought very likely to raise its rates once again in December.

Still, Australian Dollar bulls aren't letting the greenback have matters all its own way. For the moment momentum appears to be shiftin back towards the Aussie, with a modest base apparently building around 0.7626. This was the low of October 27 and November 7. Keep an eye on this process. If support here holds then a challenge to channel upside could come next week.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX