Article Highlights

  • China’s trade balance shows 275B CNY surplus vs. 345B CNY expected, 298B CNY previous
  • China’s USD-denominated trade surplus clocks in at $40.8B vs. $47.6B expected, $44.6B previous
  • No significant monetary policy clues from Yellen’s speech
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Forex price action was a mixed bag of beans, as Asian session players priced in China’s weak trade data and the dollar’s slight recovery across the board.

Major Events:

China’s trade data – Data from the world’s second largest economy showed a trade surplus to the tune of 275B CNY in December, a bit lower than November’s 298B CNY figure and the expected 345B CNY surplus. In dollar terms, the surplus is at $40.82B compared to last year’s $59.63 figure. It’s also lower than November’s $44.6B reading and the expected $47.6B surplus. In fact, that’s the smallest surplus since March! What gives?!

Simply put, exports fell while imports rose. Sales declined by a whopping 6.1% from a year earlier following a 0.1% increase in November. Meanwhile, imports shot up by 3.1% after rising by 6.7% in November.

The numbers don’t look any better in yuan terms. Exports only rose by 0.6% from a year ago following a 5.9% rise in November, while imports jumped by 10.0% after shooting up by 13.0% in the previous month. Taken all of 2016’s months together, China is estimated to have enjoyed a $509.96B surplus.

Amidst the weak trade data, customs spokesman Huang Songping couldn’t resist throwing shade at future POTUS Trump. In a presser, he said that “China is the biggest victim” of the anti-globalization trend, and that they will “pay close attention to foreign trade policy after Trump is inaugurated President.” If you recall, Trump has been very vocal (when is he otherwise?) about limiting China’s current trading practices. Keep close tabs on this drama, folks!

Mixed sentiment for equities – China’s weak trade data did a number on the Australian and Chinese markets. Australia’s A SX 200 is down by 0.79% and the Shanghai index is down by 0.38% even as Hang Seng crawled back up with a 0.52% gain.

Nikkei bucked the trend with a 0.89% gain as Japanese traders sighed in relief as the dollar crept back up against the yen. It also didn’t hurt that it’s almost earnings season for the Japanese markets, and analysts are mostly expecting good things from the previous quarter when the yen got clobbered across the board. Remember that Japan relies heavily on its exports, so a weak currency could only mean good things for its major companies.

Major Market Movers:

USD – Better-than-expected data and mostly hawkish rhetoric from FOMC members pushed the dollar back up against its counterparts.

EUR/USD is down by 18 pips (-0.17%) to 1.0608, USD/JPY rose by 42 pips (+0.37%) to 115.08, and USD/CHF inched 6 pips higher (+0.06%) to 1.0109.

JPY – USD/JPY’s recovery inspired rallies for other yen crosses despite a cautious tone in the equities markets.

EUR/JPY popped up by 22 pips (+0.18%) to 122.07, GBP/JPY is up by 44 pips (+0.32%) to 139.91, and AUD/JPY is up by 21 pips (+0.24%) to 86.12 after clocking in a session high of 86.29.

Watch Out For:

  • 8:00 am GMT: German wholesale price index (0.3% expected, 0.1% previous)
  • 10:30 am GMT: BOE credit conditions survey
  • 10:30 am GMT: BOE Monetary Policy Committee member Saunders to give a speech in London

See also:

U.S. Session Recap
London Session Recap

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