Market Drivers for July 15, 2013
Chinese GDP weaker, but not as bad as feared AUD rallies
Dollar slightly bid ahead of Retail Sales
Nikkei 0.23% Europe 0.69%
Europe and Asia:
NZD Performance Services Index 55 vs 56
CHF Producer & Import Prices 0.1% vs. 0.3%
GBP Rightmove House Prices 0.3% vs. 1.2%
CNY IP 8.9% vs. 9.1%
CNY GBP 7.6% vs. 7.7%
USD Advance Retail Sales 8:30
USD Business Inventories 10:00
CAD Existing Home Sales 9:00
Currencies were relatively quiet on the first trading day of the week with little newsflow or economic data to move the pairs either way. The only major set of data came out of China where Q2 GDP results, Industrial Production and Retail Sales showed that growth was clearly slowing, but not as badly as the market had feared.
China’s Q2 GDP missed its mark printing at 7.6% versus 7.7% eyed while Industrial Production slowed markedly to 8.9% from 9.1% forecast. This was the weakest IP reading in more than three months and second consecutive monthly decline.
On the other hand Retail Sales increased to 13.3% from 12.9% projected – their best reading since the start of the year. After nearly a decade of torrid near double digit growth the Chinese economy is undoubtedly slowing, but it is also transitioning from a purely investment and production driven model to a more balanced approach that is starting to see a pick up in consumer led growth.
The news came as mild relief to currency traders who feared a deeper slowdown in Chinese activity and a result the Aussie saw some relative strength rising above the 9100 level in late Asian trade. Although as the morning progressed the pair slipped back below the 9100 figure on general dollar strength.
The dollar caught a mild bid in mid-morning European dealing especially against the yen as US yields rose and helped to propel the pair to a high of 99.85. However, the pair’s direction for the rest of the day is likely to be driven by US data with both Retail Sales and Empire Manufacturing on tap at the start of the North American session.
The market anticipates as rise in Core Retail Sales to 0.5% from 0.3% the month prior, and if the data could match or beat the forecast USD/JPY could make a run at the 100.00 barrier as the day proceeds and currency traders gain more confidence in US growth.The news could also drive the EUR/USD below 1.3000 as some of the anti-dollar sentiment from last week’s impromptu Ben Bernanke press conference begins to wear off. However, if the number miss, the modest dollar rally from overnight is likely to quickly unwind as markets begin to anticipate more dovish testimony from Dr. Bernanke this week.