Is China a worry?

China is starting to make negative headline waves. The Yuan fell to its lowest permitted level outright on Friday as concerns over the health of the Chinese economy begins to gnaw at investor confidence. Currently the yuan is allowed to fluctuate no more than +1% from a central parity level set daily by the PBoC. Is the market trying to ignore the price action signs? The continued weakness this week in the on shore spot Yuan market is a clear sign posting that something is amiss. Price action indicates that capital outflow is occurring. Should the market be more concerned at this point?


Asia

  • CNY: China’s Premier Wen Jiabao warned that the momentum for a recovery in economic growth isn’t yet in place. He noted last week-end that difficulties may persist for a while. That said the current pace of economic expansion is within the targeted range. Analysts do not see any stimulus effort happening any time soon.
  • FT: It has been reported that China will cut taxes on the profits that foreign companies take out of the country by up to +50% after rules on withholding taxes were relaxed to encourage more overseas investment.
  • NZD: New Zealand’s Business Performance Service Index fell –3-points to 54.3 in June m/m.
  • AUD: Aussie RBA minutes hinted at slightly better domestic growth momentum after material easing of monetary policy in the last six-months. The market is discounting short term interest hikes. However, the deterioration in economic data out of the US and Asia could be capable increasing economic strain.
  • SGD: Singapore’s non-oil domestic exports rose +6.8%, y/y in June, or +6.7% on a seasonally adjusted basis. Most of this support came from the pharmaceutical sector, up +24%, y/y.
  • NZD: Kiwi CPI rose by a subdued +0.3%, q/q in Q2, below the RBNZ’s projection and market consensus at +0.5%. This leaves headline inflation running at +1%, y/y and at the bottom of the RBNZ’s inflation target range. This should give policy makers plenty of room to cut rates should domestic and external conditions deteriorate.
  • CNY: China’s Foreign Direct Investment contracted by -6.9%, y/y, in June, compared with +0.1% in May. Inbound investment declined to +$12b.
  • JPY: The BoJ’s minutes showed that some board members see the possibility of CPI staying flat longer than expected and a few think the BoJ should not rule out any policy options in advance if risks from Europe materialize. Everyone of note continues to monitor the yen value closely.
  • CNY: China’s new home prices in June rose in the most number of cities tracked by the government in 11 months as buyer sentiment improved after the PBoC cut interest rates. Prices climbed in 25 cities out of the 70 that the government looks at.
  • NZD: Kiwi farmers income took a hit after Fonterra auctions saw whole milk power (WMP) prices fall by a further-5.8%, following a -4.1% fall earlier this month.
  • AUD: Aussies Westpac Banking Corp. leading Economic Index climbed +0.8%, m/m in May, compared with +0.5 % in April.
  • AUD: Aussie NAB business confidence index fell to -2 in Q2, from -1.
  • NZD: Kiwi ANZ job advertisements fell -1.4%, m/m in June, following a revised +3% rise in May.
  • KRW: South Korea’s department stores sales shrank -2.0%, y/y in June, compared with +1.0%.
  • CNY: The Chinese government warned local governments against easing property curbs after home prices in 70 major cities grew in June, following eight straight months of declines.
  • PHP: The IMF raised the Philippines’ growth forecasts to +4.8% in 2012 from +4.2% previously, and noted that growth could surprise to the upside. 2013 GDP growth is expected at +4.9%.
  • AUD: Aussie export price index rose +1.0%, q/q in Q2, compared with a +7.0%, q/q fall in Q1 to mark the first rise in three-quarters. The import price index rose +2.4% in Q2, after a +1.2% fall in Q1.
  • NZD: Kiwi net migration figures show a net gain of 490 people in June, following a revised increase of 200 migrants in May.

 

AMERICAS Week in FX

EUROPE Week in FX

 

WEEK AHEAD

  • Inflation data come from down-under in AUD
  • Retail Sales are delivered from CAD
  • Growth numbers and housing data is released in USD and GBP
  • The EUR releases Business climate conditions in Germany
  • The Kiwis have a monetary policy review and
  • CNY will get the ball rolling with Flash Manufacturing PMI

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell