Mingze Wu | Jul 15, 2013 06:08AM ET
This morning was a strong Chinese data day, with a series of data coming in together at 10:00am Beijing. The biggest number that everybody was looking out for was Q2 GDP, which came in at 7.5% for Q2 Y/Y in line with expectations. However, other measures of GDP came in lower than expected – Real GTP Q/Q grew only 1.7% versus the expected 1.8%, while Real GDP YTD came in at 7.6% vs 7.7% expected. Besides the weaker than expected GDP, other measurements of the Chinese economy were disappointing as well. Industrial Production (Jun) Y/Y came in at 8.9% vs an expected 9.3%. Fixed assets Inv is also lower, growing at 20.1% vs 20.2% expected. The only saving grace from today’s slew of data was Retail Sales, which grew 13.3% Y/Y, much higher than the 12.9% expected. However, this is not exactly a good thing considering that retail CPI has been rising higher than expected, while Produce Price Index has been lagging behind. With PBOC wanting to instil structural reforms in Chinese economy which is leading to slower growth rates, having a stronger inflation rate which is not supported by producers gains increases their problems that they need to solve. Hence all in all, the data isn’t encouraging, with “mixed” being a very generous description that we can give.
Hourly Chart
Daily Chart
Fundamentally, with China looking weaker, we can rule out the Chinese economy being the savior for current AUD/USD weakness. This leaves AUD to fend for its own, and looking at last week’s AUD/USD weakness, where price barely rallied despite extreme USD weakness due to Ben Bernanke’s dovish speech, it is clear that AUD is on a long bearish road. Credit Suisse’s Overnight Index Swap is pricing in a 60% chance that RBA will cut rate by 25 bps in August, and that will also continue to weigh heavily on AUD/USD moving forward.
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