Chinese markets will be very much in the spotlight as we head into the latter half of the week, with a spate of key releases scheduled for Thursday and Friday. A host of recent data misses have sparked global fears that the Asian superpower is heading for an economic slowdown, and further misses could compound these concerns.
Thursday’s releases, scheduled for 03:00 GMT, relate to international trade. Chinese exports (YoY) are forecast to have grown 4.0%, having shrunk 18.1% according to the previous release. Chinese exports (YoY) are forecast at 2.4% growth, short of the 10.1% growth reported previously. Consensus estimates the trade balance to show a 0.90B surplus, versus a February deficit of 22.98B, the first deficit since April 2013.
If the data misses expectations, the small positive forecast does not leave much room for the nation to report a surplus. In light of this, a miss would likely show another deficit. In this scenario, expect considerable fallout in the currencies of those economies with close ties to China, most notably Australia.
Friday’s releases, scheduled for 02:30 GMT, relate to inflation. Consensus forecasts the YoY CPI figure at 2.5%, a gain on the previous release at 2.0%. The MoM equivalent is forecast at -0.5%, versus a previous release of 0.5% and the PPI YoY release is forecast at -2.2% versus a previous release of -2.0%.
Traditionally, declining prices will weigh on the currency markets. In this instance however, that may not be the case. Declining prices in China illustrates that the government, if required, has plenty of room to implement monetary policy stimuli in the event of a slowdown, and with disappointing manufacturing, employment and output data all having been reported throughout the last few weeks, the ability to stimulate the economy may be forefront in traders’ minds at present. In light of this, expect a somewhat volatile response in the AUD and the NZD as traders on either side of the coin interpret the release in opposite fashions.