China’s CPI rose 0.2% year-on-year in January, down from 0.8% in December, according to the National Bureau of Statistics of China. The market forecast was 0.4%.
Month-on-month, CPI rose 0.2% in January. This matched the prior 0.2% increase and came in below the 0.3% forecast. PPI fell 1.4% year-on-year in January, after a 1.9% drop in December. The forecast was -1.5%.
After the release, AUD/USD was up 0.20% on the day at 0.7087. The report also noted earlier expectations for January: CPI at 0.4% year-on-year and PPI at -1.5%. December’s readings were 0.8% and -1.9%.
CPI tracks inflation and shifts in buying patterns. It is reported year-on-year and month-on-month. PPI tracks the price changes producers face.
The cited technical levels for AUD/USD were 0.7100, 0.7129, and 0.7158 on the upside, and 0.7007, 0.6908, and 0.6834 on the downside. A delayed US January jobs report was tied to a recent four-day government shutdown.
China’s latest data raises new growth concerns. Consumer prices fell 0.3% in January from a year earlier. This move into deflation follows a flat reading in December 2025 and is far weaker than the market expected. Producer prices also dropped a steep 2.5%, pointing to ongoing weakness in the factory sector.
This extends a worrying multi-year trend. In January 2025, producer prices fell 2.0%. In early 2023, CPI growth was only 0.2%. The early-2026 data suggests the post-pandemic rebound has not created lasting inflation pressure.
For derivatives traders, this supports a bearish view on the Australian dollar, which often moves with China’s economic outlook. AUD/USD, trading near 0.6550, could fall further as demand for Australian commodities softens. There is little near-term support for the Aussie.
One simple approach for the next few weeks is to buy AUD/USD put options. For example, March-expiry puts with a strike near 0.6400 can limit risk while positioning for a move back toward the late-2025 lows. This trade can benefit from a weaker spot rate and from rising volatility.
There may also be opportunities in options on commodity futures, especially iron ore and copper. Ongoing deflation in China’s producer prices points to weaker demand for industrial materials. Buying put options on these commodities is a direct way to trade slower Chinese construction and manufacturing.
The main risk to this bearish case is a major stimulus move from Beijing. Watch closely for policy actions from the People’s Bank of China or new fiscal spending aimed at lifting domestic demand. A stronger-than-expected response could trigger a sharp, even if temporary, rebound.
here to set up a live account on VT Markets now
