Foreign Exchange Newsflash: Asian Data Forecast to Weigh Heavily on Risk Appetite Tomorrow

July 13, 2016 - Written by Ben Hughes

STORY LINK Foreign Exchange Newsflash: Asian Data Forecast to Weigh Heavily on Risk Appetite Tomorrow

The near-term could be tumultuous for commodity currencies, as not only will Chinese data come in the morning, but major US stats are due over the afternoon.

The 'Aussie' is set to be influenced by the announcement of the June unemployment rate tomorrow; current forecasts are for a rise from 5.7% to 5.8%.

NZD AUD Exchange Rates Forecast to Fluctuate on Risk Appetite

Last night’s Asian trading session yielded significant risk events and announcements which are forecast to shift the relative value of various leading global currencies during coming sessions.

Economic statistics from the world’s second largest economy grabbed the headlines overnight, with China publishing its official trade balance data for last month. Holders of the Australian Dollar (currency : AUD) and the New Zealand Dollar (currency : NZD) watched the numbers closely and were disappointed to see the monthly Yuan-denominated Import numbers print at a worse than anticipated -2.3%.

Chinese Data Could Send Australian Dollar Reeling

This represented a significant slide from May’s counterpart number of 5.1% and was well below analysts’ expectations of a contraction of 1.2%. The figurers spelled bad news for Australia and New Zealand’s plentiful exporters, for whom China remains the number one export destination for their goods and services. Patrick Bennett of CIBC Capital Markets summed up the stats in a note earlier, stating that, ‘the picture that emerges continues one of slow global demand and only moderate demand in China.’

Bennett even managed to find the cloud attached to a silver lining when he analysed the relatively go-ahead Chinese Export data, published at the same time, noting that, ‘exports in yuan terms expanded in June, marking the fourth consecutive month of growth, illustrates the impact of the weaker yuan, which is around 3 percent weaker against the U.S. dollar year-to-date, but around 7 percent weaker on a trade-weighted basis,’

US Dollar Exchange Rates Expected to Gain on Safe-Haven Demand

Bennett summed up by stating that the results from China, ‘cannot disguise that global demand remains stilted, at best.’ This observation, if it becomes conventional wisdom, is likely to see investors increasingly shift out of risk and into safe haven assets including the Swiss Franc (currency : CHF) and the Japanese Yen (currency : JPY). However, one factor weighing on the Japanese tender in coming months could be anaemic growth expectations for Asia’s second economy. These fears were accentuated by last night’s news that Japan’s government has slashed its official domestic Gross Domestic Product forecast for this fiscal year from 1.7% down to 0.9%.

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