China CPI a touch hotter than expected 4.5% vs 3.8% exp YoY

November's Producer Price Index and Consumer Price Index have been released as follows: 

Producer Price Index

Producer Price Index (YoY) (Nov) -1.4% vs -1.5% expected vs -1.6% prior. 

Consumer Price Index

• Consumer Price Index (YoY) (Nov) vs 4.5% expected at 4.2% vs 3.8% prior. 
• Consumer Price Index (MoM) (Nov) 0.4% vs expected 0.1% vs 0.9% prior. 

Analysts at Westpac explained that inflation has not been a barrier to monetary easing in China if needed, with CNY fragility the bigger concern. CPI was seen bouncing to 4.3% for he year from 3.8% for the year but as analysts noted, this was due to a surge in food prices, especially pork. Non-food inflation was only 0.9% year in October. 

FX implications

• AUD/USD support levels: 0.6800 0.6770  0.6730  
• AUD/USD resistance levels: 0.6865 0.6890 0.6920

The market's focus is elsewhere as we approach the 15th December deadline for which the US is scheduled to impose additional tariffs on Chinse imports. However, in recent trade, the US Agriculture Secretary, Sonny Perdue, was reported by Bloomberg as saying that the extra tariffs due for implementation this weekend may not now be imposed. This ought to be good for market sentiment, the yuan and the Aussie.

“We have a deadline coming up on the Dec. 15 for another tranche of tariffs, I do not believe those will be implemented and I think we may see some backing away,”

Perdue said, according to Bloomberg.

"The AUD/USD pair is neutral in the short-term, having found intraday support at the 38.2% retracement of its November slump at 0.6820. In the 4-hour chart, it is developing below the 20 and 200 SMA, both lacking directional strength, while technical indicators hover around their mid-lines, with modest upward slopes. The bearish case would be confirmed on a break below the 0.6800 figure, while the upside will remain limited by sellers aligned around 0.6865," 

- Valeria Bednarik, Chief Analyst at FXStreet explained.