Article Highlights

  • Chinese trade surplus jumped from 3.1 billion USD to 34.1 billion USD
  • Exports in China dropped by 6.2% year-over-year in April
  • U.K. election exit polls hint at possible Conservative party victory
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Economic reports took the backseat in today’s Asian trading session, as forex traders were glued to the tube awaiting the U.K. election results. Exit polls hinted at a possible victory for current Prime Minister David Cameron and his Conservative party, allowing pound bulls to party in anticipation of a united government front.

GBP/USD surged 272 pips (+1.75%) and is well past the 1.5500 handle, GBP/JPY is enjoying a whopping 342-pip rally (+1.88%) and is closing in on the 186.00 mark, while EUR/GBP is down 157 pips (-2.21%) to a low of .7230.

Across the globe in China, economists are starting to worry about the 6.2% slump in the country’s exports and a 16.1% drop in imports which led to a jump in its trade surplus from 3.1 billion USD to 34.1 billion USD in April. These trade components indicate that the world’s second largest economy might be losing its competitiveness and that the domestic economy is also facing a huge downturn in demand. This spells downbeat prospects for Australia, China’s number one trading buddy, which is also dealing with a local economic slowdown as well.

Minutes of the RBA meeting revealed that policymakers downgraded their GDP estimates for this year and the next. Officials also added that non-mining investment isn’t likely to pick up anytime soon, reinforcing the view that further rate cuts and a steeper depreciation for the Aussie might be necessary. Despite this grim outlook, AUD/USD is able to keep its head above the .7900 handle with a 9-pip gain (+0.10%) and AUD/JPY managed to advance by 22 pips (+0.24%) so far.

The BOJ also released the minutes of their latest policy meeting, which showed that policymakers are seeing green shoots in the Japanese economy. They noted that exports are picking up, business investment is increasing moderately, and labor and income situations are improving steadily. Yen pairs are slightly higher after this report was printed, partly due to the return in risk appetite to the forex market.

Market watchers could continue to zoom in on the U.K. election results in the next few hours since there are no top-tier reports lined up. Germany will print its industrial production and trade balance figures at 7:00 am GMT while Switzerland is set to release its monthly CPI reading around 8:00 am GMT. As for the U.K., the trade balance and Halifax HPI data are due, but a confirmed victory for the Conservative party might steal the show and push pound pairs higher. Stay tuned!

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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