China Trade Data and a Weaker Yuan Set the Tone Early

The markets remain in the grip of the U.S – China trade war, with the direction of the Yuan now dictating proceedings.
Bob Mason

Earlier in the Day:

It was a busier Asian session on the economic calendar this morning.

Economic data through the session included June current account figures out of Japan and, more importantly, July trade data out of China.

For the Japanese Yen

The current account surplus narrowed from ¥1.595tn to ¥1.211tn in June, which was better than a forecasted narrowing to ¥1.140tn.

The Japanese Yen moved from ¥106.112 to ¥106.120 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.03% to ¥106.24 against the U.S Dollar

Out of China

The trade surplus narrowed from $50.98bn to $45.06bn in U.S Dollar terms. Economists had forecasted a narrowing to $40.00bn.

  • Exports rose by 3.3% year-on-year, coming in ahead of a forecasted 2% fall. In June, exports had fallen by 1.3%.
  • Imports fell by 5.6%, year-on-year, which was also better than a forecasted 8.3% slide. In June exports had tumbled by 7.3%.

The Aussie Dollar moved from $0.67772 to $0.67820 upon release of the figures, before easing back. At the time of writing, the Aussie Dollar was up by 0.25% to $0.6774.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.20% to $0.6459.

In the Asian equity markets, it was risk on with the major indexes in positive territory at the time of writing. The CSI300 led the way early on, with a 1.18% gain. While the Hang Seng and Nikkei were up by 0.69% and 0.64%, the ASX200 trailed, rising by just 0.34%.

Support from the majors came from better than expected trade data and a stronger than expected daily fixing of the Yuan.

The Day Ahead:

For the EUR

It’s another relatively quiet day ahead on the economic calendar. There are no material stats to provide direction on the day. The lack of stats leaves the EUR in the hands of the ECB Economic Bulletin due out later this morning.

Negative sentiment towards the Eurozone and global economies could add pressure on the EUR on the day.

Any downside could be offset should there be any negative chatter from Beijing or Washington on trade.

At the time of writing, the EUR was up by 0.11% to $1.1211.

For the Pound

It’s a relatively quiet day ahead on the data front, with economic data limited to July house price figures released early this morning.

House prices fell by 9% in July, according to the latest RICS Survey. The figures had a muted impact on the Pound in the early hours, however.

A lack of stats through the day will continue to leave the Pound in the hands of Boris Johnson and Brexit. While the Pound may have bottomed out for now, there may well be more twists and turns in the coming weeks.

The EU has continued to stand its ground and stated that there is little point in meeting at the negotiating table. With the UK Parliament in summer recess, there’s not much talk of preventing a no-deal departure to support a Pound resurgence.

At the time of writing, the Pound was up by 0.19% to $1.2166.

Across the Pond

It’s another quiet day for the Greenback, with key stats due out of the U.S limited to the weekly jobless claims figures.

Barring a material jump in claims, we would expect the Oval Office to continue to be the key driver. Will there be an olive branch for China, or will Trump stand his ground? Some pressure must be building on Capitol Hill for a change intact…

At the time of writing, the Dollar Spot Index was down by 0.01% to 97.534.

For the Loonie

It’s a relatively quiet day ahead on the economic calendar. House price figures are due out later today. We would expect the markets to brush aside the numbers as market sentiment towards the global economy grips the majors.

This morning’s trade data out of China set the tone early. Better than expected figures provided early support, though much of the upside came off the back of a bounce-back in crude oil prices.

News of the Saudis looking to provide price support gave WTI and Brent 2.92% and 2.63% gains for the morning.

The Loonie was up by 0.20% at C$1.3276, against the U.S Dollar, at the time of writing.

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