Forex Trading Library

Bad News for China’s Economy

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The beginning of the week brings a bearish tone for the AUD/USD, the Chinese news during the weekend (emphasized on the commodity sector’s evolution and the global economic environment) pushing down the major FX pair. According to the latest data, the Chinese economy hit the highest threshold of trade surplus on record in the month of October. To set the numbers straight, the trade balance shows a $61.4 billion surplus in October versus the expected $62 billion and over September’s $60.34 billion.

The yoy (year-on-year) exports went down 6.9% versus an expected -3.2% and a previous value of -3.7%. Imports also recorded an 18.8% drop yoy, missing the estimated -15.2%, but under the 20.4% drop in September.

The bearish tone set on Monday for AUD/USD continued also throughout yesterday’s sessions, on behalf of new reports on China’s missed PPI (Producer Price Index) and CPI (Consumer Price Index). The second large economy in the world had a 5.9% PPI decrease in October yoy (same as in September), missing by a narrow margin the expected -5.8%. The yoy CPI has the same evolution, missing the expected 1.5% and coming out at 1.3% (previous 1.6%), confirming the economic downfall.

The pair’s trend arrived at a relative standstill as the sessions closed last night, investors looking forward to the Chinese IP data from tomorrow and the Aussie’s domestic consumption and jobs reports next week.

Yesterday was also released the official US import price index for October which, according to latest data, had a steep fall in October majorly due to the drop in petroleum import prices. The index went down with 10.56% yoy, estimations being of only -9.4%. It’s important to note that the previous month’s reading was revised at 11.3%. Mom (month-on-month), the index had a 0.5% downturn, estimations being of -0.1%. As for the petroleum import prices, they registered a 2.1% drop mom and a 48% drop yoy. Taking a step back, the drop in import prices excluding fuel in the largest since 2009.

WTI’s (West Texas Intermediate) barrel recovered yesterday from Monday’s loss, marking a session high in the mid $44.00s. The trend charger was the Energy Agency’s (based in Paris) report, which argued that OPEC’s current strategy may keep prices low in the coming years. On the other hand, the supply glut still poses a threat over crude prices and also, there is a setback from the greenback side in the form of Fed’s rate hike in December.

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