Market Analysis

Antipodean currencies slump after weaker than expected Chinese trade data

The Australian dollar and New Zealand fell sharply lower against the US dollar and the Japanese yen currency this morning after the Chinese economy unexpectedly released much worse than expected trade data, with both Chinese exports and imports data falling into contraction last month.

The AUDUSD and NZDUSD pairs fell close to half a per cent during the Asian trading session, as exports for the world’s second-largest economy declined -4.4% on a year-on-year comparison basis during December, marking the largest drop seen in Chinese exports in two years and a steep decline from the previous reading of +5.4%.

The AUDUSD pair, a key gauge of global risk sentiment, fell back towards its 100-day moving average, after posting a strong start to 2019 and eventually peaking around the $0.7234 level just last week. The NZDUSD pair traded back towards the $0.6800 level, after previously hitting a three-week trading high last week, at $0.6843.


AUD/USD Daily Candlestick Chart

AUD/USD Daily Candlestick Chart 


Aside from slowing global demand and a recent weakening in China’s domestic economy, today’s worse than expected figures could also partly be attributed to normalization of orders data between U.S and Chinese companies, following months of front-loading, before trade tariff measures officially come into effect.

China’s imports also posted their worst reading since July 2016, as they declined -7.6% for the same period, falling considerably short of economist’s forecasts of +3.5%. The data points to internal demand from Chinese consumers cooling, as companies and domestic consumers feel the effects of the ongoing and trade dispute with the United States and generally remain cautious of a further deterioration in the economy.

Further adding to Chinese policymakers concerns, today’s trade data also showed China’s largest trade surplus with the United States since 2006, with the surplus rising a staggering $323.32 billion from last year, which is an increase of 17.2%. The wider than expected trade surplus figures is expected to create further tensions between Washington and Beijing, as the Sino-U.S trade dispute simmers on with no clear resolution in sight.

Today’s trade data certainly seemed to sour the mood for Asian investors, with the Hang Seng tumbling over 1.50% lower on the news, while the Shanghai Composite pressured lower towards the 2,500 level.

Traders moved back into the safety of the Japanese yen and gold, as investors generally fear a protracted slowdown in the Chinese economy and potentially a worsening of Chinese trade data during the months ahead, as the after effects of the trade tariffs start to kick-in for the Chinese economy, causing the global economic climate to soften further.


Written by Nathan Batchelor, External Analyst


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