Dollar marks time as China data neutral

It was a mixed bag of news on the China data dump in Asia this morning. Both industrial production and retail sales beat estimates in August, though fixed asset investment disappointed with a below-expectations performance.

 

Super Thursday, indeed

 

Industrial production ticks higher

Industrial production rose 6.1% y/y in August following a 6.0% gain in July. Economists had anticipated a steady 6.0% advance as well. Consumer spending also picked up in August, rising 9.0% y/y, a faster pace than the 8.8% analysts had forecast and matching the increase seen in June. On the flip side of the coin, fixed asset investment only rose 5.3% y/y year-to-date, missing the expectations of a 5.5% gain.

After the data, a China Statistics Bureau official commented that the domestic economy remains steady with some signs of improvement with the effects of pro-growth measures starting to filter through. He stated that the impact from US-China trade frictions on the China economy are “not significant” but there will be an impact on the global economy. Investors would appear to have a slight different outlook for the impact on the local economy, having sold China shares down 18% since the first tariffs were imposed in April.

 

ChinaA50 Daily Chart

Source: Oanda fxTrade

 

USD/CNH rose marginally after the data dump, hitting an intraday high of 6.8513 from 6.8462. The pair has now settled back down at 6.8490. China shares also reacted negatively to the data, with the China50 index dropping 0.5%.

 

USD/CNH 30-Minute Chart

Source: Oanda fxTrade

 

US retail sales seen slowing

The data dock for the rest of the day includes Euro-zone trade balance for July, as the first set of US-China tariffs take hold, and is expected to show a narrowing of the surplus to EUR18.0 billion from EUR22.5 billion. Bank of England’s Carney is scheduled to speak, though not expected to cause too much excitement after a neutral central bank kept rates steady at yesterday’s meeting.

US retail sales kick off the North American session and are expected to show slower growth on a month-on-month basis in August, up 0.4% m/m after 0.5% in July. Industrial production and capacity utilization are both seen strong, capacity at 78.2% from 78.1% (sign of a robust manufacturing sector) and production rising 0.3% m/m after +0.1% the previous month.

Fed’s Evans is due to speak, possibly the last Fed speaker before the FOMC media blackout period commences tomorrow. University of Michigan sentiment is also seen ticking higher in September, rising to 96.6 from 96.2. All-in-all, the US data looks as if it will confirm a still robust economy, despite the trade war threats.

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

Have a great weekend.