China’s GDP Beats Estimates

Late Friday in her opening remarks at a New York institute, Cleveland Federal Reserve President Loretta Mester noted that the Federal Reserve should not delay hiking rates any further. She cited the near full unemployment rate of 5.10% as the main basis for lifting off interest rates while remaining optimistic that US consumer inflation would follow suit. The Fed’s preferred gauge of consumer inflation stood at 1.30%, below the target rate of 2.00% and recent economic data has shown declines in US production. Ms. Mester is one of the few hawks on the FOMC voting board as more and more members are pivoting towards leaving rates unchanged until the global risks dissipate. The USDJPY currency pair remains range bound, currently exhibiting no clearly discernible directional trend and trading near support at 118.73.

The markets were jittery into the release of the third quarter Chinese GDP numbers, but were relieved as official data showed a soft increase in broader economic activity. Beating analyst expectations by a small margin, GDP increased at a pace of 6.90%, but nevertheless printed below the previous quarter's growth rate of 7.00%. Chinese officials had previously commented that it would be difficult for the world's second largest economy to keep up the 7.00% pace of growth, sparking speculation that the biggest export economy could face a hard landing. Today's GDP numbers however were taken as positive with Asian equity markets trading higher while European and US equity markets are likely to follow the momentum. USDCNH is currently trading at 6.3758 in what looks like a steep consolidating falling wedge, which potentially points to an upside breakout targeting 6.5000 in the medium-term.