Falling commodities prices, especially in iron ore last month, likely to add further downward pressure on China inflation in this period, Fullerton Markets analysis shows.

  • Historical data shows China PPI y/y changes, has been moving in line with Aussie most of the time. So any deceleration in China factory inflation may induce traders to add Aussie short positions versus dollar, or euro.

PPI.png

  • Earlier Chinese economic data suggested domestic demand has been slowing down. Customs figures released Monday show imports rose 11.9% to $1.4 billion, slowing from 20.4% growth in March.
  • Recent PBOC’s monetary tightening and housing curbs set for slowing down the pace of Chinese companies’ demands on raw material, not a good sign for Australian economy.
  • Median forecast on China PPI at 6.8% in April, lower than 7.6% in March. Data due on 9.30am tomorrow.
  • If reading to fall below 6.8%, AUD/USD may fall towards 0.73. 

 

 

Fullerton Markets Research Team

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