Market Analysis

Chinese economy expected to release more sluggish first quarter growth figures

The Chinese economy releases gross domestic product data from the first fiscal quarter of 2019 this week, with most economists predicting that the world’s second-largest economy will post its weakest growth data since 1992, as the ongoing trade war between the U.S and China continues to hurt its domestic economy.

Growth from January to March is expected to have increased by 1.4 percent, while year-on-year growth during the first fiscal quarter is expected to hit a twenty-seven year low, of 6.3 percent. The previous fiscal quarter or the last fiscal quarter of 2018, saw growth of 1.5 percent inside the Chinese economy, while year-on-year comparative growth expanded by 6.4 percent.

The recent policy measures put in place by Chinese policymakers appear to have helped stabilize China’s economy. Data out last Friday showed that Chinese exports increased more than anticipated during the month of March, while credit lending also saw a sharp pick-up.

The better than expected credit data highlights that the PBOC’s recent reserve ratio requirement cuts and fiscal stimulus are helping local bank’s issue much-needed credit to businesses. The bullish Chinese data helped to off-set the International Monetary Fund’s latest downgrading of global growth, for the third time in just six months.

The increase in export and credit data also bodes well for other data points being released this week, namely Chinese retail sales and industrial production figures for the month of March. Both numbers are expected to show a steady increase from the dismal figures released in February.

With a trade deal yet to be signed between the U.S and Chinese officials, market sentiment is finely balanced, as most traders and investors remain optimistic that a trade deal will eventually be signed. Much worse than expected data from the Chinese economy could bring a sense of urgency back to negotiations, as financial markets have become complacent.

The AUD/USD pair is likely to be affected by the Chinese data releases, although more so by its own domestic jobs numbers later this week. The AUD/USD pair has been defying the fundamentals surrounding its domestic economy, with the Australian dollar trading around the 0.7150 level against the greenback.


AUD/USD Daily Mountain Chart Source-Activtrader Platform

AUD/USD Daily Mountain Chart | Source: ActivTrader 


Technically, a bullish triple-bottom has formed on the lower time frame charts, with near-term upside targets likely to be focused around the 0.7245 and 0.7280 levels. A sustained move below the 0.7080 level will likely prompt more weakness in the AUD/USD, although bulls have recent been defending the 0.7100 handle vigorously.


Written by Nathan Batchelor, External Analyst

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