- Australia’s quarterly house price index up by 1.5% vs. 2.6% expected, 2.0% previous
- AU NAB business confidence up from 4 to 5 in November
- China’s industrial production up by 6.2% in November vs. 6.1% expected and previous
- China’s fixed asset investment (ytd/y) up by 8.3% as expected
- China’s retail sales (y/y) up by 10.8% vs. 10.2% expected, 10.0% previous
Forex price action was as tight as my non-holiday pants, as Asian session traders brace for this week’s major events.
Australia’s business confidence – A few hours earlier, a monthly business survey printed mixed results for Australia. Business conditions worsened from an upwardly revised reading of 7 (up from 6) in October to 5 in November. This marks the second monthly decline in a row, and puts the data back to its long-term average for the first time since April 2015.
Business confidence was the silver lining, as it came in at 5, a bit higher than last month’s 4. What’s more, all industry groups have shown positive readings for the month. Overall, the numbers aren’t too good but aren’t too bad either, as businesses remain confident even as their current conditions have worsened. Looks like we’ll have to look in other directions to confirm if the economy will indeed bounce back from its GDP miss in Q3 2016!
China’s data dump – The world’s second largest economy printed its retail sales, industrial production, and fixed asset investment numbers.
Retail sales grew by 10.8% from a year earlier in November, the fastest pace since December 2015. Analysts point out that higher property prices and better job prospects may have encouraged consumers to buy more.
Auto sales – which accounts for 13% of retail sales – jumped from 8.7% in October to 13% in November as consumers aren’t sure if the government would extend a tax incentive next year. Luxury brands, home appliances, and cosmetics also received a boost thanks to property buyers furnishing their purchases and a weak yuan pushing consumers into spending their moolah inside the country again.
Industrial production, a broad measure of factory output, unexpectedly popped up by 6.2% from a year earlier in November. The expansion was aided by a 6.7% increase in manufacturing output as well as a 9.9% uptick in production of electricity, water, gas, and heat. Crude steel output also rose by 5.0% from a year earlier, its fastest since June 2014. Mining sector output was the only blight on the record with its 2.9% decline. Investors had expected it to remain at its October rate of 6.1%.
Last but not the least is the fixed asset investment data, which remained at 8.3% in the first 11 months of the year compared to last year. Details of the report, however, tells us that the gap between state and private sector spending continue to pose threats of economic imbalances.
Investments by private firms have slowed in the year to November, and is putting more pressure on the government to make up for the slack with more spending. In fact, data from China’s Ministry of Finance recently revealed that government spending has picked up by 12.2% in November after slipping in October. Overall, the numbers suggest that private firms continue to struggle even as China’s broad economic reports show improvements.
Mixed risk sentiment – Forex price action was a dud during the Asian session, as traders brace for this week’s FOMC statement. Remember that market players have been betting on a Fed rate hike for months. Some have even taken profits to stay in the sidelines during the much-awaited event.
Nikkei, buoyed by a higher USD/JPY, is up by 0.51%. Meanwhile, Hang Seng is down by 0.16% the Shanghai index is up by 0.27%, and Australia’s A SX 200 is down by 0.32%.
Major Market Movers:
AUD – The rest of the major currencies were in tight ranges, but the Aussie took a few hits after China’s relatively strong data inspired speculations that the government will turn from stimulating to regulating the economy to prevent imbalances. For forex newbies out there, you should know that China is one of Australia’s largest trading partner.
AUD/USD shot up to a high of .7515 before finishing the session back to .7496 while AUD/JPY also hit a session high of 86.40 before slipping back down to 86.23. Ditto for EUR/AUD, which dipped to 1.4166 before rising back up to 1.4186.
- 8:00 am GMT: Germany’s final CPI expected to remain at 0.1%
- 8:00 am GMT: Germany’s wholesale price index (0.3% expected, 0.4% previous)
- 10:00 am GMT: Italy’s industrial production (0.3% expected, -0.8% previous)
- 10:30 am GMT: U.K. CPI numbers. Read Forex Gump’s trading guide if you’re trading it!
- 10:30 am GMT: U.K. core CPI (1.3% expected, 1.2% previous)
- 10:30 am GMT: U.K. PPI input (-0.4% expected, 4.6% previous)
- 10:30 am GMT: U.K. RPI (y/y) (2.1% expected, 2.0% previous)
- 10:30 am GMT: U.K. HPI (7.3% expected, 7.7% previous)
- 10:30 am GMT: U.K. PPI output (0.2% expected, 0.6% previous)
- 11:00 am GMT: German ZEW economic sentiment (14.2 expected, 13.8 previous)
- 11:00 am GMT: Euro Zone employment change (q/q) (0.3% expected, 0.4% previous)
- 11:00 am GMT: Euro Zone ZEW economic sentiment (16.5 expected, 15.8 previous)
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
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