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Poor Chinese And Japanese Data Threaten Pound Dollar Exchange Rate

December 11, 2012 - Written by John Cameron

The early part of this week’s session has brought the release of a mixed bag of data from Asia’s two leading economies. Chinese Industrial Production and Retail Sales data, released on Sunday, provided room for optimism, revealing that factory output and shop sales had increased at an accelerated rate last month.

However, the positive sentiment regarding the chances of a pick-up in the world’s second largest economy did not last long. The early hours of yesterday morning saw the release of worryingly poor Chinese trade data. The domestic export figure showed at 2.9% - significantly below analysts’ expectations of a 9.0% showing and down from October’s healthy 11.6% annualised figure. Equally as concerning, from a global perspective at least, were the accompanying Chinese import numbers which showed a markedly reduced demand for foreign imports in the Chinese market during the course of last month. Overall, this made for a Chinese Trade Balance for November of US$19.63bn – well behind analysts’ expectations of a US$26.85bn print.

Investors hoping that Japan’s Q3 GDP growth figures, also released during Monday’s Asian session, might provide more encouragement regarding the Far East’s economic prospects, were severely disappointed. The Japanese numbers showed that Asia’s second largest economy shrank by an alarming 0.9% in the three months to the end of September. The annualised growth rates made even worse reading for investors holding Yen-denominated assets, showing that activity in Japan’s economy had contracted by some 3.5%.

The news from Asia helped to suppress appetite for risk during yesterday’s session, with global indices struggling to break into positive territory throughout the day. A continuation of the ‘risk-off’ trading environment today could see the GBP USD exchange rate retrace its losses of the past week to trade back below the 1.6000 level once again.

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