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China New Export Orders Slide, with Focus now on Trump

Bob Mason
Economic data out of China and Japan reflected the effects of the ongoing trade war, with focus now on the U.S and Canada, the NAFTA deadline today.

Earlier in the Day:

Economic data released through the Asian session this morning was on the heavier side, with key stats including employment, inflation and industrial numbers out of Japan, August private sector PMI numbers out of China and July private sector credit figures out of Australia.

For the Japanese Yen,

The Jobs / Applications ratio came in at 1.63 in July, coming in ahead of a forecasted and June 1.62. While the ratio hit the highest level in over 40 years, the unemployment rate rose to 2.5%.

Tokyo’s annual core rate of inflation picked up to 0.9% in August, coming in ahead of a forecasted and July 0.8%.

  • The main contributors to the pickup in the annual rate of core inflation were: Fuel, light and water charges (+3.2%); culture and recreation (+2.1%); medical care (+1.3%).
  • Dragging on inflation was a 1.4% fall in prices for furniture and household utensils, with housing prices rising by just 0.2% and clothes and footwear by 0.6%.

July industrial production slipped by 0.1%, falling short of a forecasted 0.2% rise, following a 1.8% slide in June.

  • Industries that contributed to the decline included transport equipment; general-purpose, production and business oriented machinery; and iron and steel.
  • Industries that saw an increase in production included: chemicals (excl. drugs); electronic parts and devices; and information and communication electronics equipment.

The Japanese Yen moved from ¥111.024 to ¥110.995 against the Dollar through the release of the figures, before easing to ¥111.05 at the time of writing, down 0.06% for the session, this morning’s data providing little support as concerns over the Japanese economy grow.

Out of China, private sector PMI numbers came in better than had been expected in August:

The manufacturing PMI rose from 51.2 to 51.3, coming in ahead of a forecasted 51.0. While better than expected, new exports orders fell for a 3rd consecutive month however, reflecting the effects of the ongoing trade war with the U.S.

The service PMI rose from 54.0 to 54.2, coming in ahead of a forecasted 53.8.

The Aussie Dollar moved from $0.72479 to $0.72591 upon release of the figures that came out ahead of Australia’s private sector credit figures.

For the Aussie Dollar, private sector credit rose by 0.4% in July, month-on-month, coming in ahead of a forecasted and June 0.3% rise.

  • Business and housing credit picked up in July, supporting the monthly gain, while personal credit fell by 0.1%, following a flat June.
  • Year-on-year, private sector credit rose by 4.4%, easing back from June’s 4.5% rise, with personal credit weighing, down 1.4%.

The Aussie Dollar moved from $0.72574 to $0.72633 upon release of the figures, before easing to $0.7246 at the time of writing, down 0.23% for the session.

In the equity markets, it was a sea of red, the markets responding to Trump’s latest tariff threats and talk of pulling out of the WTO. The Nikkei and ASX200 were down 0.16% and by 0.29% respectively, while the Hang Seng and CSI300 saw heavier losses at the time of writing, the pair down by 1.42% and 1.01% respectively, the losses coming in spite of better than expected private sector PMI numbers out of China. The devil was in the details, with a continued decline in exports weighing.

The Day Ahead:

For the EUR, economic data out of the Eurozone includes prelim August inflation figures out of France, Italy and the Eurozone, together with July retail sales figures out of Germany and unemployment numbers out of the Eurozone.

On the data front, German retail sales figures and prelim inflation numbers out of the Eurozone will be the key driver, though the talk of additional tariffs on China and Trump’s renewed talk of leaving the WTO may well overshadow the numbers through the day.

At the time of writing, the EUR was down 0.07% to $1.1663.

For the Pound, it’s another quiet day ahead on the data front, leaving the Pound in the hands of Brexit chatter.

Market reaction to chief negotiator Barnier’s Wednesday comments has seen the Pound move back through to $1.30 levels, but with intensive talks scheduled for the day ahead, any negative comments will likely weigh on the Pound, which would pull back to $1.29 levels.

At the time of writing, the Pound was down 0.02% to $1.3007, with Brexit chatter the key driver through the day.

Across the Pond, economic data out of the U.S includes August PMI numbers out of Chicago and finalized August consumer sentiment numbers.

Following the release of the August CB Consumer Confidence figures on Tuesday that impressed, today’s finalized numbers are unlikely to have a material impact on the Dollar, barring a material downward revision from prelim, with Chicago PMI numbers likely to be overshadowed by trade war jitters.

At the time of writing, the Dollar Spot Index was up 0.03% to 94.749, with stats unlikely to affect the Dollar as the markets look towards Capitol Hill for more on China trade tariffs on the threat of the U.S withdrawing from the WTO. A positive would be a conclusion to trade negotiations with Canada, but it’s going to boil down to China on the day.

For the Loonie, economic data scheduled for release later today is limited to July’s RMPI number that is forecasted to be Loonie negative.

Following disappointing GDP numbers on Thursday, attention will shift to trade talks, with Canada given until today to join the Mexico – U.S agreement that was wrapped up on Wednesday.

While softer economic data will have some influence ahead of next week’s Bank of Canada interest rate decision, Canada joining the trade agreement today would likely overshadow any negative sentiment towards the stats on the day.

At the time of writing, the Loonie was down 0.25% to C$1.3016 against the U.S Dollar, the markets responding to the weaker numbers on Thursday, with trade chatter the key driver through the day.

This article was originally posted on FX Empire