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Australian Dollar Shrugs At China CPI, Local Job Data More In Focus

Australian Dollar Shrugs At China CPI, Local Job Data More In Focus

David Cottle, Analyst


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Australian Dollar, China CPI Talking Points:

  • China’s CPI grew ahead of expectations, but one-off factors may explain it
  • Producer prices also rose
  • The Australian Dollar market can take an interest in these numbers, but not this time

Get live coverage of all the major economic data which moves the Australian Dollar at the DailyFX Webinars. We’d love to have you along.

The Australian Dollar was focused squarely elsewhere on Monday and didn’t react much to news that China’s inflation had crept unexpectedly higher in August.

Official figures showed that the Consumer Price Index rose by an annualized 2.3% that month, above the 2.1% markets had been expecting, which had also been July’s gain. Producer prices rose by 4.1%, again just higher than the 4% expected.

CPI inflation has been creeping up steadily from lows below 1% chalked up in 2016. However it still remains relatively subdued and, in any case, may have been boosted this month by presumably ‘one off’ base effects and by higher food prices thanks to extremely warm weather.

These numbers are unlikely to make Beijing veer from its current path of monetary and fiscal stimulus as it attempts to mollify the effects of slowing growth and worries about a trade war with the US.

The Australian Dollar can act as a liquid China proxy in the foreign exchange market but seems not to have done so to any great extent after these data.

AUD/USD Chart (5-minute)

The Australian Dollar market is focused on the yawning interest rate differential in the US Dollar’s favor and on the roller-coaster global risk appetite spawned by those trade worries. The Aussie tends to do better when investors are more relaxed about growth prospects.

On its broader, daily chart, AUD/USD remains stuck well within the long downtrend, which has endured for much of this year. Indeed, it broke still lower just last week. However, there may be some chance of a respite in the next few sessions, even if that overall weakness endures. The week will bring official employment numbers out of Australia, with the trend of strong work creation set to continue.

AUD/USD Chart (Daily)

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--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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