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No reaction to data showing factory deflation in China

  • NZD/USD sees little action after China reports factory deflation. 
  • Global equities are likely to react negatively, pushing NZD/USD lower. 

NZD/USD currently lacks a clear directional bias. However, odds look stacked in favor of a decline, with China experiencing factory deflation. 

In September, China’s Producer Price Index or factory-gate prices fell 2.1% year-on-year versus expectations for a 1.8% decline and August’s 2% drop. 

Meanwhile, the Consumer Price Index rose 1.7% year-on-year, missing the forecast for a 1.8% growth following August’s 2.4% rise. 

The bigger-than-expected decline in the PPI is bearish for commodity dollars like the NZD and AUD. 

So far, however, the NZD/USD pair has shown resilience. The currency pair continues to trade largely unchanged on the day near 0.6654, having hit a high and low of 0.6663 and 0.6648 early Thursday. 

However, the resilience could be short-lived as China’s factory-gate deflation could aggravate risk aversion in the global markets. The US stocks fell on Wednesday on the fading prospects of US fiscal stimulus. At press time, the S&P 500 futures are down 0.22%.

Technical levels

 

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