AUD/USD gains, set for a weekly advance after Chinese CPI accelerates more than expected

Australian dollar traded higher and was poised for a weekly gain against its US peer on Friday, after a report stated that annualized consumer prices in China, Australias largest export market, rose more than projected in January.

AUD/USD touched a daily high at 0.9024 at 1:30 GMT, after which consolidation followed at 0.8990, rising 0.12% for the day and set for a 0.32% weekly advance. Support was likely to be received at February 13th low, 0.8928, while resistance was to be met at February 13th high, 0.9032.

According to data by the Chinese National Bureau of Statistics, the annualized index of consumer prices rose to 2.5% in January, which outstripped preliminary estimates, pointing to an inflation rate of 2.3%. In monthly terms, consumer prices rose 1.0% in January, again exceeding forecasts of a 0.7% gain.

At the same time, the annualized index of producer prices in China dropped 1.6% in January, while experts had anticipated a larger rate of decrease, 1.7%.

These data points came out a day after it became clear that employers in Australia cut 3 700 job positions in January in comparison with a month ago, while the median forecast by experts pointed to 15 000 new jobs added. In December compared to November 23 000 jobs have been lost.

The rate of unemployment in the country climbed to 6.0% in January, a level unseen since July 2003, from 5.8% in December. Analysts had projected a lesser increase – to 5.9%.

The yield on Australian benchmark 10-year bonds dropped two basis points, or 0.02 percentage point, to reach 4.15% compared to Thursday, when the yield fell 4.5 basis points.

Goldman Sachs Group Inc. forecasts that AUD/USD will probably drop to 0.8800 in a six-month period and to 0.8500 in a twelve-month period.

Meanwhile, the greenback lost ground against its peers yesterday after a report by the US Census Bureau showed seasonally adjusted retail sales fell 0.4% in January, while the median forecast of experts pointed to a flat performance. Decembers retail sales have been revised down to a 0.1% dip from a 0.2% gain previously. This indicator accounts for about one third of consumer spending in the country, which is the major driving force behind economic growth.

In addition, the Department of Labor reported that the number of people who filed for unemployment benefits for the first time in the United States increased to 339 000 during the week ended on February 8th, which came as another evidence that labor market remains vulnerable. Analysts had projected that the number of claims will drop to 330 000 from 331 000 in the preceding week.

Elsewhere, the Aussie was trading steadily against the euro, with EUR/AUD cross up 0.04% to 1.5245 at 7:57 GMT. AUD/NZD pair was also steady, gaining 0.03% for the day to trade at 1.0762 at 8:00 GMT. It earlier touched a session high at 1.0796. Statistics New Zealand said today that prices of food in the country climbed 1.2% in January compared to December, after a month ago they dipped 0.1%.