Market Analysis

Chinese GDP data to set the tone for financial markets this week

The release of Chinese gross domestic product is expected to set the tone for financial markets this week, with median estimates for China’s GDP growth between July-September set at 6.1 percent. A growth figure of under 6.0 percent may cause worry amongst financial markets this week, as the trade dispute with the United States is likely to have impacted upon the world’s second-largest economies growth prospects.

With a worsening corporate debt and growing cash-flow problems for many Chinese businesses, GDP forecasts from many leading economists are now set as low as just 5.0 percent for the year 2020. The Chinese Communists Party, alongside the PBOC, may have to introduce new stimulus measures to maintain a 6.0 percent annual growth rate.

Chinese is often considered the engine of the world, and a key barometer for global growth, making the upcoming GDP report particularly important to investors. Weakening growth in China will likely mean the ongoing slump in the eurozone and other countries heavily invested in the Chinese economy will continue well into next year.

Last Friday, U.S President Donald Trump announced that the recent trade negotiations with China had ended with a ‘phase one deal’, which could take up to five weeks before it will be finished. The trade deal encompasses intellectual property theft, financial services, agricultural purchases and also a comprehensive agreement on foreign exchange issues.

President Trump also said that Sino-U.S negotiators are working on the second phase of the deal, which will focus on technology transfer. An announcement was also made that the recent increase in trade tariffs, which was set to start on October 15th, will not happen. President Trump ended by saying that both sides are close to ending the trade war.

Assuming the deal last, Friday’s announcement by United States President Donald Trump is likely to take the sting away from a much worse-than-expected growth number from the Chinese economy later this week.


AUD/USD Daily Candlestick Chart | Source: ActivTrader

AUD/USD Daily Candlestick Chart | Source: ActivTrader

The Australian dollar has received a lift from improving risk-sentiment and expectations that the RBA may not cut interest rates again this year. The Australian Dollar has been gaining ground against the greenback, although the upside could be fairly limited. The $0.6875 and $0.6915 levels are likely to mark the very top of the latest rally if bulls extend gains beyond the $0.6840 area.


Written by Nathan Batchelor, External Analyst, ActivTrades

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.