FX Markets Have Chinese And US CPI, US-China Trade Talks On Calendar

Talking Points:

There are only two data prints truly worth paying attention to this week, Chinese and US CPI for March.

A lighter calendar means focus will remain on the news wire and trade tensions between the world’s largest two economies.

Retail trader positioning has turned neutral on the Euro and the US Dollar after their recent consolidation.

04/11 Wednesday | 01:30 GMT | CNY Consumer Price Index (MAR)

Chinese policymakers have continued to press forward more stimulus in order to stem credit risks, and we have seen market participants watch Chinese inflation figures as a proxy for domestic demand.Declines in price levels have been viewed in the context of serious stresses on domestic consumption and economic growth. With the Chinese Yuan strengthening to its strongest level versus the US Dollar since August 2015, price pressures are expected to ease off to +2.6% from +2.9% (y/y). The prospect of tariffs, particularly on soybeans, could easily provide a bump to inflation figures down the road this year – just not yet. As a liquid and transparent currency, the Australian Dollar should prove sensitive to the data.

Pairs to Watch: AUD/JPY, AUD/USD, USD/CNH

04/11Wednesday | 12:30 GMT | USD Consumer Price Index (MAR)

Incoming inflation data for March will show that both measures of the US Consumer Price Index are now above the Federal Reserve’s medium-term target of +2%. Headline CPI is due in at +2.4% from +2.1%, and Core CPI is due in at +2.1% from +1.8% (y/y). Readings of this nature should keep the Fed on track to raise rates again in June, which Fed funds are implying a 78% chance of happening. But after the March US Nonfarm Payrolls report, odds of four hikes this year have slipped away completely, down below 25%. Given the backdrop of China-US trade tensions proliferating, and the high offs of a June hike already priced-in, it would seem that the March US CPI release will only have a limited impact on markets.s