Chinese data has again come in on the weak side and that is likely to weigh on Asian markets today.

For June Chinese was CPI 2.7% y/y with the expected 2.7% y/y and prior 2.7%. The monthly figure was -0.1%. PPI was flat at 0.0% y/y with the expected 0.2% y/y and prior 0.6%.

This was the weakest PPI print in around three years and is not a good sign for what might lie ahead. The AUD/USD and NZD/USD are both in the red today and pushing lower. The Aussie, in particular, has not been all that strong recently and is falling away towards the 0.6900 level. We also saw Westpac Consumer Confidence numbers released which came out at -4.1% on the month, May was -0.6% m/m. So another significant slide here.

While the Aussie has tried to stick its head above 0.7000 and did manage to for a couple of days, the sellers have come back hard for it. The fall in both the AUD and NZD, have been aided by a stronger than anticipated USD. The Greenback has bounced ahead of Fed boss Jerome Powell testifying in front of Congress, where most expect him to give more directions on where monetary policy will be headed.

All the fundamentals from Australia and New Zealand at the moment are clearly bearish. Add to that the continued weakness from China who is Australia’s major trading partner and it is hard to make a bull case. The only saving grace is really the USD. The hopes for the bulls would rest in a more dovish outlook from Powell. The market is broadly expecting a 25 bp rate cut in July. If he winds back that expectation back, then the USD will rally further. In reality, the AUD and NZD are at the mercy of the Fed at the moment and there is not much the RBA or RBNZ can do about it.