Winding up this week’s economic data from China, the first quarter GDP numbers showed a 6.70% increase, matching analyst forecasts. However, compared to the previous quarter, China’s GDP slipped from 6.80% to 6.70%. The rather soft data was however supported by improved industrial production figures which increased 5.80% in March, beating analysts’ forecasts of 5.50% and up from 5.40% in February. Retail sales remained soft, rising 10.50%, down from 11.10% in February.
The data today follows exports numbers released earlier in the week which saw the world’s second largest economy posting a trade surplus with exports picking up the pace while imports fell at a slower pace of 7.60%.
Overall, economic data from China continues to show a modest improvement in GDP forecasts likely to be upgraded into the second quarter. While January’s overall performance has been disappointing, there has been a notable improvement across all quarters, including manufacturing PMI’s which posted an expansion after a prolonged period of slump, with the index hovering below the 50 level.
With no major disappointments coming out from China, the markets continued with the overall theme with the yen on the back foot. The Aussie and the Kiwi dollars got a shot in the arm with the Chinese data as investors flocked to higher yielding currency in an improved risk sentiment.
NZDUSD fell sharply in yesterday’s trading losing 1.15% for the day but today’s China data managed to push the Kiwi back to yesterday’s open. The AUDUSD was, however, the biggest beneficiary out of today’s economic data from China.
Earlier this week, Australia’s unemployment rate fell to 5.70% in March, down from 5.80% previously as the labor market continues to support a healthy pace of trend.
This, alongside modest inflation, is likely to keep the RBA on the sidelines for most of the second quarter. However, the Aussie’s appreciation could remain a key factor during the upcoming RBA meetings, but unlikely that the central bank will use monetary policy to target directly the exchange rate.
The US Federal Reserve will be on hold during its April interest rate decision, but prospects of a June rate hike remain on the table. Until then, the RBA could stand pat on policy while also having enough economic data to go by to make any further changes to the benchmark interest rates which stand currently at 2.0%.