Chinese CPI is out at the bottom of the hour. It’s a major release with the consensus at 4.0% y/y after a 4.2% reading in November. The low estimate is 3.4% and the high at 4.4%. The monthly change is expected at +0.3%.
The market is expecting a 50bps cut in the reserve-requirement ratio (RRR) by the end of next week. A reading above 4.2% takes that off the table, in my opinion.
I expect a fairly even skew in the initial trade. A reading of 3.8% or lower. AUD/USD climbs 45 pips to 1.0350. A reading of 4.2% or higher and AUD/USD falls 45 pips to 1.0260.
If anything, I would set up for a two-day slide toward 1.0160 on a high reading.
