Forex Trading Library

China’s Economy is struggling

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Latest results show that the US wholesale prices, which are gauged through the PPI (Producer Price Index), are not different in August than in July even though fuel prices followed the trend of the crude and dropped significantly. The PPI level remained at +0.2% in August although investors were expecting a 0.1% reduction. A look at the PPI components shows that the food prices rose with 0.3%, the energy expenses gave up 3.3% and gasoline went down 7.7% – biggest downfall since January. Core PPI (representing the PPI minus food and energy prices) went up 0.3%, exceeding the expected 0.1% forecast. The August CPI (Consumer Price Index) will be released Wednesday, forecasts being towards a slight decline for the month of August.

Taking a look at the GBP/USD pair, we can see that the spot continues to linger around the 1.5430 threshold, even though consumer sentiment weakened in the last period in the US. The margin of the interval in which the trend is moving back and forth is 1.5409 (April-June, 38.2% of the rally) and 1.5460 (July, 61.8% if the rally). Due to the fact that the trading interest seems to have crumbled towards the end of last week, the pair has failed to respond to the feeble data. When referring to the consumer sentiment, it was considered the MCI (Michigan Confidence Index) for August, which has dropped from July’s 91.9 to 85.7 in August.

China’s economy continues the downward slope, recent information showing that the fixed-assets investments have risen in August with the slowest pace in 15 years. Industrial production also came in weaker than estimated, the National Bureau of Statistics stating that the CIP (Chinese Production Index) rose only with 0.1%, to 6.1% in August from 6.0% in July; expectations were of 6.4%. These fact raise further questions over the effectiveness of the government’s efforts to resuscitate the economy.

Taking a look at the commodities we can see that Gold continued its loosing spree, opening with $1,098/Oz in the morning, even though US stocks took a hit early in Friday’s session. Once again we can see the lack of response from the yellow metal regarding risk aversion in US’s equity markets. There may be the possibility that investors are more focused on a possible rate hike this week. At the end of the session the metal tested the $1,100/Oz area. Crude also registered a 2.5% loss on Friday, closing at $44.77. Goldman Sachs (the influential US bank) has lowered its forecasts for 2016 from $57/barrel at $45/barrel, declaring that the supply gulp will most certainly persist in 2016 as well.

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