Chinese Eco Data Down PBoC Maybe ?

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China’s most recent eco release in this two day World Series of economic data was the July trade growth numbers.  July trade growth suffered an unexpectedly sharp decline in a new sign of weakness for the world economy.

Customs data on Friday showed exports rose just 1 per cent over a year earlier, down from June’s 11.3 per cent growth rate and below forecasts of about 5 per cent. Imports rose 4.7 per cent, down from the previous month’s 6.3 per cent.

The data reinforce indications the economy is still weak despite repeated government stimulus efforts.

China’s trade growth has fallen steadily this year as global demand for its exports cooled and efforts to boost domestic consumption have had only a limited impact.

China’s data is having a more direct effect on the commodities market then the currency market today.

Yesterday’s data, showed the retail sales and industrial production had fallen more than expected. The only positive note was a drop in consumer prices.

Today base metals are trading down by 0.2 to 0.5 percent at LME electronic platform. The Asian equities are trading down after weak Chinese releases. The Chinese exports grew at a slower pace of 1 percent while the imports increased by 4 percent indicating weak economic activity and may further weaken base metals, as China is the largest consumer.

Emerging economies like China, India and Korea are continuously missing their growth targets due to weak eurozone and declining US consumer spending and may continue to support downside.

The economic releases of Japan in the form of industrial production were weak on the back of weak machine orders and BOJ’s refrained from easing and may further weaken base metals. While, the Euro-zone may mostly remain weak as investor’s hopes of ECB’s immediate action to save the euro faded.

From US, the import prices may continue to increase while the monthly budget statement may continue to remain in the negative territory indicating weak economic activity and may continue to support downside.

Continuous weak China coupled with fading investor sentiment; base metals may open on a weaker note and may continue to drift lower.

Silver is stuck sometimes in a difficult position, being classed as a precious metal but also used as an industrial metal. It can be sometimes difficult to predict and can also get hit with a double whammy.

Today, precious metals (gold and silver) are expected to trade in a fairly tight range but to maintain some strength and will react to the value of the USD.

Lately the precious metals have been supported by hopes and dreams of stimulus from both the Feds and now the PBoC.

Silver prices have also drifted a bit at the COMEX after ECB lowered its GDP outlook for 2012-13 and as a result the Euro fell, pressurizing the metal. Chinese trade data came in unexpectedly weak which have seen in the Asian equities trading lower and hence silver came under pressure. But the same has raised hopes for the PBOC to provide stimulus.

In the absence of any European releases, the US data are likely to support dollar. So, silver might come under pressure during the US session.

Gold on the other hand, seems to be confined within a range of $1605-24 for quite a long time and at present moment little movement is seen.

News shows that the former top gold producer in the world, South Africa’s production fell another 4% in June. Meanwhile, the world’s largest gold consuming nation, China, is promoting a national gold policy which recognizes the precious metal as a strategic asset. The market dynamics are slightly today; still the core fundamentals are positive for gold.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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