Chinese GDP Beats Allaying Fears of Global Slowdown

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Market Drivers for October 21 2014

Chinese GDP slightly better than expected helps lift Aussie

UK PSNB 11.1 vs. 9.2B

Nikkei -2.03% Europe 0.66%

Oil $83/bbl

Gold $1252/oz.

Europe and Asia:

CNY GDP 7.3% vs. 7.2%

CNY Retail Sales 11.6% vs. 11.8%

CNY Industrial Production 8.0% vs. 7.8%

GBP UK PSNB 11.1B vs. 9.3B

North America:

USD Existing Sales 10:00

Slightly better than expected Chinese GDP data provided a mild boost to commodity dollars in Asian session trade today on what was otherwise an uneventful FX trading session as majors continued to consolidate in European dealing.

Chinese GDP printed at 7.3% – the slowest quarterly reading since the depths of the credit crisis in 2009 – but nevertheless better than 7.2% eyed by the market. Although Chinese growth continues to decelerate from the torrid double digit rates of 2010-2012 it remains impressive. More importantly the latest figures suggest that the global slowdown feared by many investors may not be as severe as initially thought and with both US and China continuing to perform positively global demand should continue to expand despite the economic woes of the Eurozone.

On yet another positive note Chinese Industrial Production increased to 8.0% from 7.8% forecast indicating that need for for fiscal stimulus may be diminished. The better than expected IP data also suggests that export demand remains robust and is yet another sign that global economy continues to expand at a positive pace.

The news helped to lift both Aussie and kiwi with the former clearing the 8800 level while the later broke above the 7900 figure. Both pairs ran into sell orders above those levels but remained well bid into European dealing. Although both antipodeans remain near the bottom of their ranges they appear to have traced out a bottom over the past several weeks as expectations of any Fed tightening have deceased while investor concerns over growth in Asia have abated. It’s unlikely to either one of the pairs will stage another significant rally given muted growth expectations, but both pairs should find support at current levels as their yield provides great value for carry traders.

In North America today the calendar remains light with only the Existing home sales on the docket. Housing has been a sore spot in the US economy as low rates have not translated into more transactions with credit remaining tight. The recent decline in energy prices and further drop in rates may finally prompt demand and the market is looking for a better number of 5.11 million units versus 5.05 million the period prior. A good print could help boost USD/JPY which was dragged lower by the falling Nikkei earlier in Asian trade with the pair once again possibly probing the 107.00 figure if the data turns out positive

Boris Schlossberg
Managing Director

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