The Aftermath (of China's CPI and PPI, that is).

China’s Consumer Price Index (CPI) came in at 0.6% month on month (versus expectation of 0.4%). This also showed improvement from June’s reading of 0.1%. CPI annualized figure moved to 2.7% from 2.5%.

An improvement was noted in China’s Producer Price Index (PPI) as it moved up higher to -2.4% year on year in July (June’s reading was -3%). This makes the 2^nd month China’s PPI has shown improvement – indicating a recovery trend in the economy.In terms of currency – how did they react to the latest release of figure from the largest importer of commodities?

•  AUD/JPY continued trading at 75.80 despite the positive China data. This could be attributed to the Covid19 resurgence in Australia, as well as the bleak economic forecast by RBA on Friday. Further drop should be expected if a similar trend is seen in global equities following the US-China war, as well as the internal politics issue in the US – which would increase demand for the Yen, long deemed as an anti risk currency.

• In terms of AUD/USD – the RBA has stated that AUD is “broadly consistent with its fundamental determinants” – and although “the USD may correct, it will not be an easy task to take the AUD lower when the Bank’s “pain threshold” for the AUD is some way off still”.

Let’s wait and see, shall we?