China’s consumer price index rose 0.7% in November from a year ago after reaching a 0.2% increase in October, China’s National Bureau of Statistics reported on Wednesday. The average market expectation was 0.7% during the mentioned period.
China’s CPI inflation rate reached -0.1% m/m in November versus a rise of 0.2% previously.
China’s producer price index fell 2.2% year-on-year in November, after a 2.1% decline in October. The data was worse than market expectations of -2.0%.
Market reaction to China’s CPI and Producer Price Index data
At press time, the AUD/USD pair was down 0.08% on the day to trade at 0.6635.
Australian dollar price last 7 days
The table below shows the percentage change of the Australian Dollar (AUD) against the major currencies listed in the last 7 days. The Australian dollar was the weakest against the Canadian dollar.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.00% | -0.65% | 0.60% | -0.90% | -1.04% | -0.55% | 0.43% | |
| euro | -0.00% | -0.65% | 0.56% | -0.90% | -1.05% | -0.56% | 0.42% | |
| GBP | 0.65% | 0.65% | 1.25% | -0.25% | -0.40% | 0.09% | 1.08% | |
| JPY | -0.60% | -0.56% | -1.25% | -1.49% | -1.63% | -1.15% | -0.17% | |
| Canadian | 0.90% | 0.90% | 0.25% | 1.49% | -0.15% | 0.35% | 1.34% | |
| Australian dollar | 1.04% | 1.05% | 0.40% | 1.63% | 0.15% | 0.50% | 1.49% | |
| New Zealand dollar | 0.55% | 0.56% | -0.09% | 1.15% | -0.35% | -0.50% | 0.98% | |
| Swiss franc | -0.43% | -0.42% | -1.08% | 0.17% | -1.34% | -1.49% | -0.98% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the Australian dollar from the left column and move along the horizontal line to the US dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section was published on Tuesday at 23:034 GMT as a preview of China’s CPI and PPI data.
China Consumer Price Index, Producer Price Index Overview
China’s National Bureau of Statistics (NBS) will publish its data for November at 01.30 GMT. The CPI is expected to show a 0.7% year-on-year rise in November, compared to 0.2% in October. The Producer Price Index is expected to show a decline of 2.0% in November versus a decline of 2.1% previously.
The Consumer Price Index is a leading indicator for measuring inflation and changes in purchasing trends. The annual reading compares prices in the reference month with the same month of the previous year. Meanwhile, the Producer Price Index is a measure of the rate of inflation experienced by producers.
How could China’s CPI and PPI impact AUD/USD?
The AUD/USD pair is trading positively during the day ahead of China’s CPI and PPI data. The pair rose after the Reserve Bank of Australia (RBA) decided to keep the official cash rate (OCR) steady at 3.6% after the conclusion of the December monetary policy meeting on Tuesday. Markets may become cautious ahead of the US Federal Reserve’s interest rate decisions later on Wednesday.
If the data comes in better than expected, it could push the Australian dollar (AUD) higher, with the first upward barrier seen at the September 16 high of 0.6688. The next resistance level appears at the Sep 17 high at 0.6707, on the way to the Jul 12, 2024 high of 0.6793.
On the downside, the December 5 low at 0.6605 will provide some relief to buyers. Extended losses could see a drop to the December 3 low at 0.6552, followed by the 100-day moving average at 0.6530.
Frequently asked questions about the Australian dollar
One of the most important factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country, another major driver is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is one factor, in addition to Australia’s inflation, its growth rate and its trade balance. Market sentiment – whether investors are snapping up riskier assets (risk on) or looking for safe havens (risk off) – is also a factor, with risk appetite positive for the Australian dollar.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This affects the level of interest rates in the economy as a whole. The RBA’s main objective is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the Australian dollar, and relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian Dollar (AUD). When the Chinese economy is performing well, it buys more raw materials, goods and services from Australia, which raises demand for the Australian dollar, raising its value. The opposite is the case when the Chinese economy does not grow as quickly as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its crosses.
Iron ore is Australia’s largest export, representing $118 billion annually according to 2021 data, and China is its main destination. Therefore, the price of iron ore could be a driver of the Australian dollar. In general, if the price of iron ore rises, the Australian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of iron ore falls. Higher iron ore prices also tend to increase the likelihood of a positive trade balance for Australia, which is also positive for the Australian dollar.
The balance of trade, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can affect the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value from the excess demand generated by foreign buyers seeking to buy its exports in exchange for what it spends to buy imports. Therefore, a positive net trade balance strengthens the Australian dollar, with the opposite effect if the trade balance is negative.
