Higher Oct Chinese CPI fails to move the needle on AUD/USD

The October Consumer Price Index has been released alongside the Produce Price Index. Persistent weakness in consumer inflation was expected despite robust upstream price pressures. However, both came with an upside surprise as follows:

October CPI +1.5 pct from a year ago vs the 0.7% prior. (Reuters poll +1.4 pct).

October CPI +0.7 pct from previous month (Reuters poll +0.7 pct).

China says October food CPI -2.4 pct from a year ago; non-food CPI +2.4 pct.

Chinese PPI (YoY) Oct: 13.5% vs 10.7 prior. (Exp 12.3%; prev 10.7%).

AUD/USD update

Nevertheless, AUD/USD remains steady around 0.7370 on the release as traders await the more highly anticipated US inflation data later today. 

October’s US CPI result is expected to be driven by a lift in core prices. ''A 0.6% rise in overall CPI would take the annual inflation rate to 5.9%, which would be the highest inflation rate since 1990,'' analysts at Westpac explained. 

In other data that will be key for AUD traders will be the Aussie jobs report on Thursday. 

''The RBA is upbeat on the labour market and expects jobs to fully recover to pre-Delta levels (Aug) by year-end (as stated in its Nov SoMP),'' analysts at TD Securities explained.

''There is still a shortfall of 284k jobs and jobs could return quickly given the easing in restrictions in NSW and VIC. Participation rate is expected to pick up to 65% in tandem with the reopening, bringing the u/e rate to 4.7% from 4.6%.''

About Chinese CPI

The Consumer Price Index is released by the National Bureau of Statistics of China. It is a measure of retail price variations within a representative basket of goods and services. The result is a comprehensive summary of the results extracted from the urban consumer price index and rural consumer price index. The purchase power of the CNY is dragged down by inflation.

The CPI is a key indicator to measure inflation and changes in purchasing trends. A substantial consumer price index increase would indicate that inflation has become a destabilizing factor in the economy, potentially prompting The People’s Bank of China to tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative (or Bearish) for the CNY.