Rally ends as China growth disappoints

Compare Money Transfer Voucher

The importance of the Chinese economy and its impact on future] world growth was evident yesterday as a rumour of a much better than expected GDP number saw risky assets fly, before a disappointing figure halted the rally. Analysts had expected a GDP figure of around 8.4% prior to the rumour that had suggested the figure would begin with a 9 handle. The gossip pushed equities higher globally, GBPUSD back into the 1.59s and AUD back above 1.04 versus the USD for the first time in a few weeks.

This was not to last however, as the figure printed at 8.1% this morning, with a pullback seen in those assets that really leapt yesterday afternoon, particularly the Aussie dollar. 8.1% marks the lowest growth figure in China for 3 years but the People’s Bank of China have a lot of room to manoeuvre monetary policy to keep growth elevated. Indeed, chit-chat yesterday also suggested that the Chinese authorities were willing to cut the Reserve Requirement Ratio (allowing banks to lend more) but there seems to be no sign of that.

Risk has also been supported by the crushingly obvious failure that was the North Korean satellite launch. Village green bonfire nights have more rocket experience you feel than those in North Korea and it is being reported that the rocket exploded 2 minutes after take-off. Asian currencies have breathed a collective sigh of relief at the news and pushed higher versus the dollar while Asian equities are also in the green.

The Chinese GDP rumour came to the rescue of risky currencies following a poor jobless claims figure from the US. Expectations had been for a slow grind lower and a continuation of the improving trend. However, that proved to be ill-founded and claims came in at the highest level since the end of January at 380k. This fits in with our expectation that the pace of job creation in the US will slow through Q2 and that further pressure will come on the Fed to launch another round of asset purchases.

The European situation was a lot quieter yesterday with only an Italian bond auction to hurdle. Once again demand was low and yields were high prompting a mid-morning slump in the single currency before other factors took the market’s attention elsewhere.

A quiet week ends in a busy fashion with the focus on Italy once again. Industrial production (09.00) and CPI (10.00) are likely to show an economy that is seeing output fall while prices rises; stagflation in other words.

Company Details

Rally ends as China growth disappoints

Get a quick quote

Open Account with International Foreign Exchange

International Foreign Exchange are located at:
52 Brook Street, Mayfair, Greater London, W1K 5DS, United Kingdom

Get a Quick Quote

Newsletter Signup to CMT

Sign up to our foreign exchange newsletter to receive news updates directly by email

Compare Money Transfer will not Share your details!

Bank Exchange Rates Comparison

High St Bank Exchange Rate

All Rights Reserved: Copyright 2006 - 2018 Compare Money Transfer Limited offering FCA Regulated Suppliers - 34 New House, 67-68 Hatton Garden, London, EC1N 8JY. +44 (0) 843 357 4882