China’s GDP Comes in Softer to Spook the Markets Early

China sees its slowest growth since 2009 to rile the markets in the wake of a Thursday sell-off that came off the back of positive stats out of the U.S.
Bob Mason
Trade War Fears

Earlier in the Day:

Economic data released through the Asian session was on the heavier side this morning, with key stats including September inflation figures out of Japan and of greater significance, 3rd quarter GDP numbers out of China that were released alongside September industrial production, retail sales, fixed asset investment and unemployment figures.

For the Japanese Yen, the annual rate of core inflation picked up from August’s 0.9% to 1% in September, which was in line with forecasts. Month-on-month, core consumer prices also rose from 0.9% to 1%, the numbers giving very little reason for the BoJ to change its stance on policy.

The Japanese Yen moved from ¥112.156 to ¥112.188 against the Dollar upon release of the figures, before easing to ¥112.32 against the Dollar at the time of writing, down 0.10% for the session.

Out of China,

The economy grew by 6.5%, year-on-year, which was worse than a forecasted 6.6% growth rate and 6.7% in the 2nd quarter, not to mention the slowest growth since 2009. Quarter-on-quarter, the economy grew by 1.6%, which was in line with a forecasted 1.6%, whilst reflecting slower growth than the 2nd quarter’s 1.8%.

Industrial production also disappointed at the end of the 3rd quarter. Industrial production rose by 5.8% year-on-year, falling short of a forecasted 6% rise and August’s 6.1% increase.

The 3rd quarter’s slower growth, attributed to the ongoing U.S – China trade war, could not be avoided in spite of Beijing’s best efforts to offset the effects of the trade war on the economy.

On the positive side, retail sales held its ground, rising by 9.2% year-on-year, which was better than a forecasted and August’s 9% rise, with fixed asset investment rising by 5.4%, coming in ahead of a forecasted and August 5.3%.

The Aussie Dollar moved from $0.71033 to a low $0.70981 upon release of the figures, down 0.01% for the session.

Elsewhere, the Kiwi Dollar was up 0.05% to $0.6547 at the time of writing, the hawkish set of FOMC meeting minutes coupled with positive economic data out of the U.S on Thursday weighing in the early part of the day.

The Day Ahead:

For the EUR, it’s another quiet day on the data front, with no material stats scheduled for release, leaving the EUR in the hands of chatter from the EU Summit, where Italy will continue to be a hot topic of discussion. The good news for now is that there’s been no rejection of Italy’s draft budget, the bad news being some angst within the coalition party over possibly changes made to the budget draft before submission that had not been agreed upon by both sides of the coalition.

At the time of writing, the EUR was up 0.07% to $1.1461, geo-political risk the key driver.

For the Pound, there are no material stats scheduled for release through the day, leaving the markets to consider the softer inflation numbers and disappointing retail sales figures, the only positive from the week being the pickup in wage growth.

With the numbers further easing pressure on the BoE to make a move, BoE Governor Carney scheduled to speak this afternoon could shed some light on what impact the numbers have had on his outlook towards monetary policy, though much will continue to depend on the British Governments progress on Brexit.

There will likely be more chatter on Brexit through the day, with the EU Summit ongoing in Brussels that will remain the key driver for the Pound.

At the time of writing, the Pound was up 0.06% to $1.3024.

Across the Pond, economic data scheduled for release is limited to September existing home sales figures that are forecasted to round off a bad week for the housing sector, which would be a negative for the Dollar, though the better than expected manufacturing numbers on Thursday will continue to support the Dollar and the FED’s hawkish outlook on policy.

FOMC member chatter could add fuel to the fire should there be any hawkish chatter, with members Kaplan and Bostic scheduled to speak this afternoon.

At the time of writing, the Dollar Spot Index was up 0.06% to 95.959.

For the Loonie, August retail sales figures and September inflation numbers are due out, which will certainly have an influence on the Loonie, forecasts are mixed with core retail sales expected to see just a marginal increase in spending, while the annual rate of core inflation is forecasted to pick up to 1.8%.

The Loonie up 0.13% to C$1.3068 against the U.S Dollar at the time of writing.

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