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Antipodean currencies a bit lower after Chinese data, RBA minutes

Summary:

  • Chinese growth matches expectations in the first quarter, whereas a package of readings for March is equivocal
  • RBA minutes point to pretty the same stuff as the latest statement, do not expect an immediate rate hike
  • Asian stocks trade mixed while Antipodean currencies take a step back

Market participants were offered an avalanche of macroeconomic readings coming from the second largest economy in the world. The most important one GDP for the first quarter came in at 6.8% in a year-over-year basis matching economists’ expectations and showing the same rate of growth as it was during the last quarter of 2017. Bear in mind that growth was running above its target for this year (6.5%) nevertheless one may suspect that due to trade frictions Chinese exports could lose traction at least to some extent and therefore net exports could add less going forward. On the flip side, it needs to be said that the steady expansion illustrates the Chinese economy is successfully shaking off threats from deleveraging as well as protectionism.

link do file download linkThe key indicators coming from the Chinese economy do not herald any sudden jumps in economic activity while this year growth target seems to be attainable. Source: Bloomberg

Apart from gross domestic product there was a package of monthly releases for March. Retail sales turned out the only positive surprise showing solid 10.1% yoy beating the consensus at 9.7% yoy. Do notice that overall retail sales were helped by online sales which spiked 35.4% over the entire quarter. Industrial output grew 6% yoy falling short of expectations set at 6.3% yoy whilst fixed asset investments (stripping out rural ones) moved up 7.5% in a year-to-date basis bringing also a miss as economists had forecast a 7.7% yoy rise. In a nutshell, the Chinese economy seems to be on track to obtain its growth target for this year quite easily albeit the data for March suggests that some sectors may go off the boil over the next couple of quarters, and this is especially true if trade tensions with the US intensify.

link do file download linkThe NZDUSD is retreating from its crucial supply area therefore a move to the downside could be expected until the price keeps hovering above 0.74. Source: xStation5

The currency market did not print any particular moves overnight while the NZ dollar has been the weakest currency in the G10 losing 0.3%. The Aussie is falling more than 0.15% as well following the RBA minutes even as they did not deviate too much from the last statement. The document underlined that a stronger AUD would slow an expected inflation recovery, and suggested that the domestic economy keeps operating with space capacity in the labour market while underemployment remains at elevated levels. It reiterated that high household debt creates uncertainty for the consumption outlook, and affirmed that risks surrounding trade tensions need to be monitored. Finally, it admitted that given the current circumstances the board agreed the next move in rates is likely to be up, but there is no a strong case to adjust policy in the near-term. The bottom line is the RBA remains quite unwilling to follow the Federal Reserve suggesting that the Aussie could struggle to reach much higher levels even against the greenback. Chinese stock markets have echoed underperformance of the Antipodean currencies, and they are trading 0.7% lower at the time of writing. Elsewhere the Japanese NIKKEI added 0.06% while the Australian benchmark inched 0.07% higher.

link do file download linkThe Australian dollar has found itself at an important place which would be supportive of buyers. If so, a move to the upside toward 0.80 might be on the cards, but without a change in rhetoric the currency may find it hard to climb further. Source: xStation5

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