• Australia’s Monthly CPI indicator on Wednesday; could surprise on the upside

• Chinese PMI surveys on Friday

• Aussie’s outperformance against the US dollar depends on stronger data releases

Market attention on US and Eurozone inflation

This week is dominated by the US Core PCE price index on Thursday and Eurozone CPI on Friday, which might significantly impact the market’s short-term direction. Additionally, economic data from China and Australia will also be released. Chinese February PMI surveys will be reported on Thursday, and the Australian monthly CPI indicator for January will be available early on Wednesday.

 Australia Monthly CPI indicator expected to tick up

The yearly rate moderated from 4.3% to 3.4% y/y, as Australia’s Monthly CPI Indicator climbed 0.7% in December. The Quarterly CPI and the Monthly CPI Indicator both point to lowering inflation pressures, although at a slower rate than originally predicted at the end of last year. This is true even if momentum was greater than expected in the month-on-month change. The Monthly CPI is expected to rise slightly to 3.6% y/y in January, up from 3.4% in December.

China PMI surveys in the agenda

The authorities in China have been increasing their attempts to strengthen a weak economic recovery. They have implemented the largest cut in the benchmark mortgage rate that has ever been seen, and they have increased the pressure on regulatory authorities to revitalize a stock market that is struggling. An indication of how successful these measures have been, could be provided by the PMI data that will be released on Friday.

In January, the Caixin China Manufacturing PMI stood at 50.8, matching December’s value and surpassing market expectations of 50.6, while in February it is predicted to slip marginally to 50.7. Factory activity has grown for the third consecutive month, which contrasts with official figures indicating a prolonged downturn leading up to the Lunar New Year holiday. Output growth was steady, with international sales increasing for the first time in 7 months, but new orders experienced the smallest growth since last October. Additionally, purchasing levels experienced the highest increase in 5 months. Firms reduced their personnel numbers again as incomplete tasks fell consecutively, while the rate of job cuts decreased to a 5-month low. Sentiment reached a 9-month high due to predictions of increased global demand, planned investments, and efforts to access new markets.

After coming in at 50.4 in December, the official NBS Non-Manufacturing PMI for China pushed up to 50.7 in January 2024, just beyond what the market was expecting, at 50.6., while February’s figure is forecasted to remain above 50, heading to 50.8.

Aussie would benefit from more robust data

The events of this week may eventually permit AUDUSD to exit its recent trading range. The current price is close to both the 200-day simple moving average (SMA) at 0.6550 and the immediate resistance level of 0.6590. A series of robust data releases from both Australia and China may propel the Australian dollar towards the 50-day SMA, which is situated in the noteworthy range of 0.6620-0.6645. Alternatively, a negative set of data, especially in China, could open the door for a protracted correction towards the 0.6440 support.