China’s Consumer Price Index rose 1.3% in February year on year, up from 0.2% in January, versus a 0.8% market forecast. CPI also increased 1.0% month on month in February, after a 0.2% rise previously. China’s Producer Price Index fell 0.9% year on year in February, following a 1.4% drop in January. This compared with a market forecast of -1.1%.

Market Reaction And Key Context

After the release, AUD/USD was down 0.80% at 0.6965. Trading before the data was already weaker, alongside a risk-off tone and a firmer US Dollar. Ahead of the release, the National Bureau of Statistics was due to publish the figures at 01:30 GMT. CPI and PPI are measures of price changes for consumers and producers, with year-on-year readings comparing the month with the same month a year earlier. Price levels cited for AUD/USD included resistance at 0.7055, 0.7089 and 0.7147. Potential support levels were 0.6906, the 100-day EMA at 0.6810, and 0.6741. Other figures referenced include the RBA’s 2–3% inflation target and iron ore exports of $118 billion a year (2021 data). Looking back to this time in 2025, we saw China’s consumer inflation data beat expectations while producer prices were still falling. This created a mixed signal for the Australian dollar, which struggled to gain traction despite the positive consumer news. That pattern of deflationary pressure from producers was a key theme we watched throughout last year.

Implications For RBA And Audusd

Now, the most recent data for February 2026 shows a more decisive shift, with consumer prices rising a stronger-than-expected 1.8%. More importantly, producer prices have finally turned positive for the first time in over a year, with the National Bureau of Statistics reporting a 0.2% increase. This suggests that the disinflationary pressures out of China, which weighed on the global economy, may be ending. This shift complicates things for the Reserve Bank of Australia, which we’ve seen hold its cash rate steady at 4.35% for the last several meetings. While the AUD/USD has been weak recently, currently trading around 0.6650, this data reduces the probability of near-term rate cuts. We should now watch for any hawkish adjustments in the RBA’s forward guidance. The Australian dollar’s position is also influenced by key commodity prices. After a period of strength, iron ore prices have recently slipped below $110 per tonne, acting as a headwind for the currency. However, this positive producer price data from China, its largest customer, could provide a much-needed floor for industrial commodity prices. Given these developments, we should consider positioning for increased volatility in the AUD/USD pair. Buying call options could be a viable strategy to capitalize on a potential rebound, with initial resistance now seen near the 0.6700 psychological level. Conversely, if global sentiment sours, put options could be used to protect against a slide back toward the year’s lows. Ultimately, the US dollar’s role as a safe-haven asset remains a dominant factor for us to monitor. Even with this encouraging news from China, any increase in global uncertainty tends to push capital into the dollar, which can limit gains for the Aussie. Therefore, we must balance this specific data against the broader risk-on or risk-off market environment. Create your live VT Markets account and start trading now.

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