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.
- 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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