Chinese Trade Data Trips Up USDJPY

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Market Drivers October 13, 2016
CNY Trade numbers miss
Euro tests 1.10
Nikkei -0.39% Dax -1.13%
Oil $49/bbl
Gold $1260/oz.

Europe and Asia:
CNY Trade Balance 41B vs. 53B
EUR GE CPI 0.7% vs. 0.7%

North America:
USD Weekly 14:00

Chinese Trade data printed much worse than expected creating concerns about global growth during Asian session trade that drove USD/JPY nearly 100 points lower from session highs before the pair finally stabilized.

Chinese Trade Balance came in at 41B versus 53B eyed as exports slumped by -5.6% versus forecasts of 2.5% gain. The Chinese Customs agency noted that the country continues to face difficulties on the export front but did say that leading indicators suggest that there will be a rebound in Q4. This was the first time in 7 months that Chinese exports contracted suggesting that global demand for Chinese good slowed markedly.

It’s too early to tell whether this was simply a dip in demand or the start of a fresh downtrend, but the data certainly struck a sour note in what has otherwise been a generally sanguine market environment about global growth. A steep decline in Chinese exports could hamper the government’s policy of slowly moving the Chinese economy towards domestic consumption, especially if income growth slows this year.

The negative surprise had an immediate impact on USD/JPY which quickly tumbled to a low of 103.62 in morning Asian trade as profit taking accelerated the selloff. The pair has been in a virtual one way uptrend for the past week on assumption that the Fed will proceed with a rate hike in December, but a significant slowdown in Chinese growth – the world’s second largest economy – could once again foil the plans of US authorities to stabilize monetary policy.

Still it may be premature to consider such a possibility, but today’s news certainly sets the stage for deeper correction in the dollar and the unit could see further weakness as the day proceeds with EUR/USD challenging 1.1050 while USDJPY could drift towards 103.00

Boris Schlossberg
Managing Director

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