PBOC, Chinese Inflation, China, AUD/USD Points to Consider: The Chinese CPI for June came in at 1.1 percent (YoY), compared to a consensus prediction of 1.3 percent. Despite virus fears and Federal Reserve hawkishness, the AUD/USD remains near its September 2020 high. Beijing is putting a lot of pressure on foreign listed companies, which is putting a lot of pressure on the regulators.
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On Friday morning, China’s June Consumer Price Index (CPI) underperformed, coming in at 1.1 percent year-over-year instead of the projected 1.3 percent. The Producer Price Index (PPI) for June came in at 8.8%, which was in line with expectations. The data will undoubtedly pique Beijing’s interest, as the Chinese government has announced their plan to conduct more monetary easing to support the economy. The relatively disappointing figures came during a period of persistent Greenback strength against the Offshore Yuan (CNH). The dollar’s recent rise follows aggressive comments from the Federal Reserve during its June meeting, as well as a “flight to quality” as risk assets tumble. TradingView provides a daily chart for the AUD/USD currency pair. Following a bad week for risk-on FX, the AUD/USD continues under pressure. Sellers exacerbated recent downside momentum due to renewed virus fears in Australia, and extra risk-off sentiment was fanned by a drop in US equities and government yields. In a week when both bonds and safe-haven currencies saw a bid, the US Dollar benefited greatly from the “flight to safety.” Falling US bond yields could indicate that the market is pricing in lesser growth as a result of the epidemic, fueling risk aversion and driving the AUD/USD down. The pair is currently trading near oversold territory on the daily RSI, having traded down to its September swing high. Investors are concerned about China’s ongoing crackdown, which has caused global markets to fall this week. In its most recent retaliation against local technological conglomerates, Beijing has targeted foreign-listed Chinese enterprises. Following the botched IPO of Jack Ma’s Ant Financial last year, China’s regulatory scrutiny has risen to new heights, with Beijing publicly targeting Didi Global only days after it listed on the New York Stock Exchange. The tirade focuses on data privacy, with Beijing dissatisfied with the disclosures Chinese businesses must make before trading publicly in the United States. TradingView provides a daily chart for the USD/CNH currency pair. Following a statement from the State Council that hinted at greater easing, China is instilling dread among foreign investors. “In light of the impact of increasing commodity prices on company production and operations, the meeting determined to preserve the monetary policy’s stability and effectiveness,” Premier Li Keqiang stated. Cuts in the statutory reserve ratio, as well as other policy tools, may be utilized if necessary, according to the statement. China’s monetary policy shift coincides with the Federal Reserve’s plans to tighten and eliminate pandemic-related stimulus and recovery measures. —- Brendan Fagan is a DailyFX intern who wrote this piece. Brendan can be reached via the comments area below or on Twitter at @BrendanFaganFX./n
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