Chinese authorities are beginning to worry

The PBoC will be making stabilizing economic growth a bigger priority. The authorities are obviously concerned over the slowdown of the world’s second largest economy. In their Q2 monetary policy report this week, policy makers repeated their “regular” three objectives of maintaining steady and relatively fast growth, adjusting economic structure and managing inflation expectations. But, they have managed to insert a new statement on growth, saying it would “put stabilizing growth in a more important position.” This message has already been repeated by the country’s President Hu earlier this week. China grew +7.6%, y/y, in Q2, the slowest rate since the global financial crisis began.

Below are some other highlights of the week:


  • KRW: South Koreas manufacturers’ confidence in August dropped to the lowest level in more than three years as the indicator fell to 70 from 81 in July. Separately, the measure of expectations at non-manufacturing companies also dropped to 69 in August, from 76 in July. Korea’s finance minister is reported as saying he will do all he can to revive the economy.
  • AUD: The Aussie HIA new home sales rose +2.8%, m/m in June, versus a +0.7%, m/m gain in May, increasing for a second consecutive month. Kiwi building permits rose +5.7%, m/m in June after a -7.2 fall in May.
  • JPY: The Japan Markit/JMMA PMI fell to 47.9 in July, from 49.9 in June, remaining below the 50 threshold. Separately, the jobless rate fell to +4.3% in June, from +4.4% in May. Also, labour cash earnings fell by -0.6%, y/y, last month, compared with a drop of -0.8% in May. Japan’s household spending climbed +1.6%, y/y, in June, compared with a +4.0% rise in May.
  • AUD: Aussie private sector credit rose by +0.3%, m/m, or +4.4% in June, following a +4.0% rise in May. Separately, the number of building units approved fell -2.5%, m/m in June, perhaps it was a small payback given the record +27% rally in May.
  • NZD: The Kiwi NBNZ survey improved slightly in July after the sharp fall in June. The activity outlook index, which has a good relationship to GDP, rose to 24 in July from 20.8 in June. However, it remained substantially below levels seen in May and April, pointing to a deceleration in economic growth towards the end of Q2 and the beginning of Q3.
  • TWD: Taiwan’s GDP fell -0.2%, y/y in Q2, after a +0.4% rise in Q1, much weaker than consensus for +0.5% growth. However, growth improved on the quarter with GDP expanding +0.8%, up from +0.3% in Q1. In view of the weaker than expected Q2 GDP, the government cut its 2012 GDP growth estimate to +2% from +3% before.
  • SGD: Singapore’s unemployment rate fell to +2.0% in Q2, from +2.1% in Q1.
  • KRW: South Korea’s industrial production fell by 0.4%mom in June, following a revised 1.3%mom gain in May (up from +1.1% estimated previously), weaker than consensus for a 0.1%mom rise.
  • CNY: China’s “official” manufacturing PMI fell to 50.1 in July from 50.2 in June, disappointing consensus expectations for a pickup to 50.5, and at odds with the rise in the HSBC manufacturing PMI. The fall was broad-based across subindices; new orders fell to 49 from 49.2 and exports orders to 46.6 from 47.5 in June. This would suggest that the PBoC could take further easing action by years end.
  • KRW: South Korean inflation slowed to +1.5%, y/y in July, from +2.2% in June, much weaker than consensus expectations of +2.0%. With weak growth and inflation towards the lower end of the BoK’s target bands, policy makers are likely to cut rates further, similar to other CBank’s.
  • AUD: Aussie house prices unexpectedly rose +0.5%, q/q in Q2 from a revised fall of -0.10%, ending five straight quarters of declines. On an annual basis, prices fell -2.1%, y/y in Q2, following a revised fall of -3.5% in 1Q.
  • INR: Indian exports and imports fell -5.5%, y/y and -13.5% in June, respectively. These compare to drops of -4.2%, y/y and -7.4%, respectively, in May.
  • JPY: The monetary base in Japan surged +8.6%, y/y in July, following the +5.9% increase in June, suggesting asset buying are finally adding net liquidity.
  • AUD: Aussie trade balance for June was at +\$9m surplus compared with a revised-\$313m deficit in May. Other data showed retail sales rising +1% (s.a) in June, following an upwardly revised +0.8% rise in May. The market now expects the RBA to remain unchanged in the near term.
  • NZD: Kiwi commodity prices fell for the sixth straight month in July. The ANZ Commodity Price Index fell -0.5% compared with a fall of -2.4% in June.
  • KRW: South Korea’s foreign-exchange reserves rose by +\$1.97b to +\$314.35b in July, compared with +\$312.38b in June.
  • CNY: China’s official non-manufacturing PMI fell to 55.6 in July from 56.7 in June. On the other hand, the HSBC services PMI rose to 53.1 in July from 52.3 in June. A similar divergence was seen earlier this week between the official and HSBC manufacturing PMI. The data suggests a mild slowdown is underway in services, cushioning the broader economy from the more severe slowing in manufacturing and preventing a hard landing.
  • AUD: Aussie AiG Performance of Service Index fell 2.3 points in July to 46.5, from 48.8 in June. This still leaves the index well above the April lows of 39.6.






  • More rate announcements from AUD and JPY
  • CHF and CNY will produce inflation data
  • Manufacturing and trade data comes to us from GBP, CAD and USD
  • GBP has inflation reports
  • Employment numbers are released in NZD, AUD, USD and CAD


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