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Chinese Inflation Cools From a Seven Month High

Benjamin Spier

THE TAKEAWAY: Chinese inflation reported at 2% in January -> Timing of the Lunar New Year distorts the annual inflation -> AUD trading steady

Chinese annual inflation fell back to 2% in January following December’s 2.5% annual rise in consumer prices. The Chinese CPI met the expectations of Bloomberg surveyed analyst. Also, producer prices fell 1.6% from January 2011, according to the National Bureau of Statistics. Consumer prices were up 1.0% on a monthly basis, and food prices rose 2.8% in January.

The PBOC recently expressed concerns over rising inflation risks resulting from commodity prices abroad and increased domestic demand. The drop in inflation from December’s seven month high should calm the central bank’s worries and possibly allow for looser monetary policy. Looser monetary policy helps Chinese growth, which should raise demand for Australian exports and is therefore AUD positive. However, Forex news sources have reported that the inflation in January and February is distorted by the timing of this year’s Lunar New Year.

Therefore, there was no significant change in Australian Dollar trading against the US Dollar in Forex markets. AUD/USD continues to trade slightly short of 1.0300, and may now see support at 1.0280, by the 76.4% retracement of the rise from the July 25 low to the August high. Resistance may be provided by the 200 day moving average around 1.0308.

AUDUSD Daily: February 8, 2013

Chinese_Inflation_Cools_From_a_Seven_Month_High_body_audusd.png, Chinese Inflation Cools From a Seven Month High

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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