Market Drivers May 16, 2016

Weekend Chinese Data misses
Aussie hits 10 week low then bounces
Nikkei 0.33% Dax 0.92%
Oil $47/bbl
Gold $1283/oz.

Europe and Asia:
JPY PPI -4.2% vs. -3.7%

North America:
USD Empire Manufacturing 8:30

It’s been a very quiet Monday in the currency market made doubly so by absence of any economic data and holidays in some northern European countries. Most of the majors have remained in very narrow ranges in generally listless trading as markets waited for North American session to begin.

The only economic news came over the weekend where a string of Chinese data continued to disappoint expectations with Industrial Production coming in at 6.0% versus 6.5% eyed while Retail Sales printed at 10.1% versus 10.5% projected.

The Aussie hit a ten week low dropping to 7244 at the start of Asian trade, but the pair found some bargain hunters at that level and short covering drove it up above the 7300 figure by start of European trade. Still the weakness in Chinese data is clear sign that the economy in Asia is continuing to slow and may in fact be getting worse as we move into the summer months. Those macro factors are likely to weigh heavy on AUD/USD which is the favorite proxy for Chinese growth in the financial markets and the pair could easily drift to 7000 and below as the summer progresses.

This week the market will get a look at AU employment data which has been surprisingly resilient in the wake of slowdown from China. However if the labor numbers miss projections, the market will quickly begin to price in yet another rate cut from RBA and will push the unit lower as a result.

In North America today the calendar is also quiet with just Empire Manufacturing on tap. Dollar bulls were disappointed on Friday after the stronger than expected Retail Sales numbers failed to produce a sustainable rally in the greenback. USD/JPY remains below the 109.00 level but has found support at 108.50 and for now continues to be trapped in 108-110 range as traders look for new themes ahead of the G-7 meeting next week.

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