Comparable results were seen for PPI during the same timeframe, reading at 4.2% as opposed to the expected 4.9% and 6.1%.
The reduction of inflationary pressure in China could be a reflection of the weak domestic economy, which has been hampered by rolling Covid-19 lockdowns in major market centers.
While Beijing announces a National Audit Office examination of the US$ 3 trillion trust sector, the Chinese real estate market is still a drag on sentiment.
Underlying metal price increases have supported the AUD/recovery USD from its 2-year bottom last month. At a certain point, the US dollar peaked relative to a number of other currencies, which enabled precious and industrial metals, mainly iron ore, to stop their decline.
Despite the fact that Australian exporters typically concur on long-term iron ore pricing, the price variations in relatively close futures contracts provide insight into the market’s general performance.
The demand for the base material is particularly high in China, which is said to mirror the country’s general economic situation. Wednesday’s slight decline in iron ore prices has been accompanied by the AUD/USD pair plummeting.
The US CPI report, which is due later this afternoon, is currently the main focus. Treasury rates initially declined after the Federal Open Market Committee -FOMC meeting late last month until a wave of hawkish remarks from Federal Reserve speakers changed that.
The inversion of the bond yield curve in the United States has been the most important event. It plummeted further still on Tuesday, with the constantly monitored 2s 10s spread once more getting near to -50 bps. 31 bps is the current spread of 2s 10s in Australia.
A severe downturn in the economy may be predicted by the yield curve inversion.
Because government bond futures contracts are only offered in those tenors in Australia, the 3s 10s are more carefully observed. After the yield curve for the three and ten-year notes dropped to within 1bps of an 18bps bottom going on for 11 years, it is still falling.
The release of the US CPI figures will be widely followed, and if the Treasury markets respond negatively, US Dollar volatility may increase, which could give rise to a substantial AUD/USD drift.