Chinese Imports Slump

Analisi Giornaliera - 08/05/2015

Latest China Trade Balance Data Shows Economy Continues to Contract

The weakening pace of growth in China is evidenced by the latest trade balance figures which showed continued contraction despite the surge in the surplus versus the prior month’s figures. A slowing domestic property market has seen local industries start to look outside of China for opportunities to export excess production in international markets.

China Trade Balance Misses Expectations

In spite of the explosion wider in the US Trade deficit after a sharp narrowing in the previous month, Chinese imports and exports continue to contract on an annualized basis. The latest figures released overnight showed that imports slumped -16.2% year over year, missing forecasts of a -12.0% decline and falling below the prior figure of 12.7%. Although exports did not tumble below the prior figure of -15.0%, the -6.4% contraction was well off the expected 2.4% expansion. This comes on the heels of announcements from China stating that the nation will choose to focus on fiscal stimulus versus monetary policy vis-à-vis interest rate cuts and reserve ratio requirement reductions to fight the slowdown. The real estate sector continues to provide headaches for the government as an economy plagued by overcapacity is facing the slowest growth in over 20 years.

Saudi Arabia and Turkey Form Syria Partnership

In a curious turn of events aimed at unseating the Assad regime, Turkey and Saudi Arabia have teamed up to supply and arm rebel forces fighting Syrian Government forces. Despite the fact that the Saudi’s are burning through currency reserves built up from years of oil revenues, this has not prevented them from continuing to support insurrection in Syria aimed at building an overland pipeline to Turkey that would open up European energy markets to Persian Gulf suppliers. The new partnership with Turkey comes after years of bitterness between the nations after Turkey’s backing of the Muslim Brotherhood. Nevertheless, despite tensions in the Gulf, oil prices slumped substantially in trading yesterday. Despite the biggest inventory drawdown in the United States since 2014 driving West Texas Intermediate prices above $60 per barrel, prices have fallen back below the key level.

Tories Defeat Labour

GBPUSD thundered higher on exit polls showing that the Conservatives beat Labour by a substantial margin. According to results already tallied, the Conservatives have built a lead of over 70 seats over Labour, gaining over 22 seats compared to the last election, but the biggest gainers have been the Scottish National Party which has surged by over 50 seats. The real loser in the latest elections aside from Labour which has seen approximately 24 seats disappear was the Liberal Democrats which saw influence fall by 45 seats in Parliament, a huge swing considering their place in the last coalition. The real question is whether the Conservatives will have a majority in Parliament which will allow them to operate without building a coalition. The Pound rallied the most against the Euro since 2009 as investors were optimistic about the next Government being formed quickly.

NZDUSD Equidistant Channel Technical Pattern

After the latest commentary from the Reserve Bank of New Zealand pointed to further dovish monetary policies, the New Zealand dollar has continued to give up ground against the US dollar despite the macroeconomic weakness exhibited in the latter. Any beat of expectations could see the US dollar continue to appreciate against NZD, however, should expectations miss, there is strong probability that NZD will recover some of the recent losses. The equidistant channel technical pattern setting up in the NZDUSD pair has a bearish bias with the prevailing near-term trend to the downside. Ideal positions are taken at the upper channel line with targets at the lower channel line. Any substantial employment miss could see the pair breakout of the channel to the upside should a move above the upper channel line occur.