Chinese Imports Jump Lifting AUD and NZD

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Market Drivers June 8, 2016

Chinese exports rise boosting commdollars
UK MP/IP beats
Nikkei 0.93% Dax -0.46%
Oil $50/bbl
Gold $1254/oz.

Europe and Asia:
CNY Trade 49.8B vs. 55.6B
UK MP 2.3% vs. 0.0%
UK IP 1.6% vs. -0.4%

North America:
CAD Housing Starts 08:30
CAD Building Permits 08:30

It is been a relatively subdued night of trading in the currency market with euro remaining in a very narrow 30 pip range, but strong import data out of China boosted investor sentiment towards the comm dollars helping to lift kiwi through the key 7000 level in midday Asian trade.

Chinese Trade data came in a bit worse than projected on a headline basis coming in at 49.8B versus 55.6B eyed, but the underlying figures suggested that demand from the world’s second largest economy is starting to pick up. Imports came in at -0.4% far better -6.8% expected, lifting investor spirits. Chinese imports are one of the earliest data points in the global manufacturing cycle and the rise last month suggested that the country’s industrial sector may be seeing a pickup in demand. In addition Chinese retail auto sales were up by 11.4% in May showing that despite the slowdown in Chinese economy the transition towards consumer demand continues at a robust pace.

The news helped to boost both Aussie and kiwi with the later piercing the key 7000 level in afternoon Asian trade. Today the market will face the RBNZ decision with most participants expecting the central bank to remain pat. Over the past month key New Zealand economic metrics including milk prices have improved and there is very little reason for the RBNZ to ease, especially as housing prices are rising at double digit levels. The central bank may once again try to jawbone the currency as the kiwi is now 3 cents higher than since the last RBNZ meeting, but given the improving state of demand it’s unlikely the the rhetoric from the monetary authorities will be overly dovish and that could provide a further boost for NZD/USD much like yesterday’s RBA announcement lifted the Aussie.

Elsewhere UK Manufacturing and Industrial Production printed far better than forecast rising 2.3% and 1.6% respectively against flat expectations. The large jump was led by pharma car and gas production with pharma rising at it highest pace since February 2014. Cable jumped nearly 50 points in reaction to the news, but selling quickly unwound the move and pushed the pair below 1.4550. The pair remains capped at the 1.4600 level for now and the Brexit polling newsflow appears to have ceased for now.

In North America it’s another quiet calendar day with nothing but JOLTs and oil inventory data on the docket. The major remain in a very narrow trading pattern after Friday’s NFP report with EUR/USD unable to break out of its 1.1300-1.1400 range for the third day in a row. Those numbers will remain critical to market players as traders look for any directional clues as the day proceeds.

Boris Schlossberg
Managing Director

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