China’s Fix Influence Cannot Last

China using the CNY fix and rumors of an imminent RRR cut has many investors wondering about changing their risk profile, specifically after a week that saw both equities and fixed-income holding and FX dance to another tune after weaker global growth data. This week’s weaker than expected PMIs from Europe and China likely require markets to at least maintain tail risk pricing. Are we entering a scenario where US tries to go it alone as being the sole “meaningful source of accelerating global growth”? This is certainly a task that is sure to expose the US economy’s vulnerability. Next week’s parade of Fed speakers, Fed manufacturing surveys and the Chicago PMI offers potential to support the USD G7 pairs.

Below are some other highlights of the week:


  • CNY: The Chinese government started the week fixing USDCNY lower and has managed to reverse much of the ‘fix’ spike seen since early March. While their statistics bureau reported new home prices falling in 27 of 70 cities last month, year over year. The market has not yet decided if the Chinese economy is set for a hard or soft landing.
  • NZD: The Westpac NZ Consumer Confidence index rose slightly to 102.4 in Q1 from 101.3 in Q4 last year and remains atop of a historically weak level. In contrast, the performance of the services index rose last month to its highest level in three-months, putting it at the second highest level in two-years.
  • KRW: Korea department store sales rose +2.9%, y/y, in February after falling -4.1% in January. However, discount store sales slipped -6.4% vs. a rise of +2.7%, y/y in January.
  • CNY: China has increased fuel prices for the second time in two-months, amid rising global crude prices and put Shanghai and Hong Kong equities on the back foot.
  • AUD: RBA minutes reiterated that there was “ample scope to ease” although rates remain appropriate for now. The minutes again suggest that the economy remains in balance with strength in the mining sector offsetting weaknesses elsewhere. Should downside risks relating to Europe and a slowdown in East Asia growth materialize, the RBA Board has room to ease. The market is pricing in a -50bp ease out the curve and is more ammo for the AUD to underperform outright.
  • AUD: Aussie Conference Board Leading Economic Index increased +1.1% in January to 126.1 following a revised -0.3% decrease in December.
  • JPY: The All Industry Activity Index fell a more-than-expected -1.0%, m/m, in January, more than the consensus forecast for a -0.7% and partially unwinds the +1.6% gain in December.
  • AUD: The Aussie Westpac Leading Index rose +0.6%, m/m, in January following a revised +0.7% increase in the previous month.
  • AUD: The Department of education and workplace relations skilled vacancies fell by -0.2% in February, compared with a revised -0.1% decline in January.
  • NZD: The Kiwi current account deficit narrowed to –N$2.7b in Q4 from –N$4.7b in Q3. Worth noting that credit card spending rose for the third-consecutive month in February by +0.5%, m/m. This has pushed year-on-year growth to +4% from +3.1% in January.
  • THB: The BoT left its policy rate unchanged at +3% this week. Analysts still expect further growth and core-inflation disappointments to push the BoT to cut rates again in Q2.
  • CNY: The HSBC flash China PMI fell -1.5pts to 48.1 in March, much larger than the usual -0.5pts seasonal adjustment. The weak PMI print will increase concerns over China’s slowing and have investors questioning if it will be a hard or soft landing for the economy. China seems to be cutting some regional banks reserves to boost credit lines. Will the PBoC be next?
  • JPY: The data surprise award for this week goes to Japan who managed to print a positive trade surplus of +JPY32.9b in February, much better than the consensus forecast for a-JPY120b deficit. Exports fell -2.7%, y/y, while imports rose a more-than-estimated +9.2%. The market will expect the yen to be back on the BoJ radar as demand for risk adverse trading strategies and natural domestic year end demand will have the currency again out performing some of its other trading partners.
  • NZD: NZ GDP grew +0.3%, q/q, in Q4, half the pace of the RBNZ’s estimates. The details showed that exports rallied +2.8% (the highest quarterly growth rate in nearly three-years), and private consumption and residential buildings were up +0.8% and +4.1% respectively. FI expects the RBNZ to remain on hold for the remainder of the year.
  • SGD: Singapore’s CPI inflation fell to +4.6%, y/y, in February from +4.8% on the prior month and lower than the consensus forecast for a rise to +4.9%. Digging deeper, most of the decline in CPI was due to lower transport costs.


Americas Week in FX

Europe Week in FX



  • A light week of data starting with German ifo Business climate
  • The USD will have another Bernanke speech to deal with
  • Consumer and Business confidence comes to us from NZD and USD
  • GBP delivers its Current a/c while CAD has GDP
  • Unemployment claims come to us from USD
  • Finally, G7 tentatively meet mid-week in Italy


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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