IronFX Daily Commentary by Sakis Paraskevov | 19/01/2016
January 19, 2016 9:30 am
China’s GDP growth slowest in 25 years • Chinese data showed that GDP growth slowed to +6.9% yoy in 2015, from +7.3% yoy the previous year. The annual rate was the weakest in a quarter of a century, indicating slowing economic momentum for the world’s second biggest economy. • On top of that, retail sales, industrial production and fixed asset investment released at the same time, all slowed in December from the previous month. • Market participants including us, expect the PBoC to add further stimulus and the government to accommodate by increasing spending, particularly on infrastructure investments. However, as China devalues yuan and the economy slows, the risk of capital outflows intensify. If the central bank cuts rates further, more capital could leave the economy, contributing to an even bigger loss in investment. • Even though AUD and NZD weakened on the news, if the strong possibility of further stimulus from the PBoC materializes, we could see these currencies recovering some of their recent losses.
Today: • UK: The CPI rate for December is forecast to have accelerated to +0.2% yoy from +0.1% yoy previously. However, as oil prices continued to tumble in December, we believe that the CPI rate could have remained stuck at 0.1% yoy. As such, a possible failure of inflation to accelerate could weaken GBP at the release. • Germany: The ZEW survey for January is expected to show a decline in both indices. The increase in global risk sentiment by the turn of the year is expected to have driven the optimism of German businesses down. This could prove EUR-negative. Also, the final German CPI rate for December is forecast to confirm the preliminary estimate. • Eurozone: Final CPI rate for December, expected to confirm the preliminary estimate and show the bloc’s inflation rate grew at the same pace as in November. Eurozone also releases its current account balance for November. • US: The NAHB housing market index for January is expected to remain unchanged from the previous month. • Speakers: Bank of England Governor Mark Carney speaks.
China’s GDP growth slowest in 25 years
• Chinese data showed that GDP growth slowed to +6.9% yoy in 2015, from +7.3% yoy the previous year. The annual rate was the weakest in a quarter of a century, indicating slowing economic momentum for the world’s second biggest economy.
• On top of that, retail sales, industrial production and fixed asset investment released at the same time, all slowed in December from the previous month.
• Market participants including us, expect the PBoC to add further stimulus and the government to accommodate by increasing spending, particularly on infrastructure investments. However, as China devalues yuan and the economy slows, the risk of capital outflows intensify. If the central bank cuts rates further, more capital could leave the economy, contributing to an even bigger loss in investment.
• Even though AUD and NZD weakened on the news, if the strong possibility of further stimulus from the PBoC materializes, we could see these currencies recovering some of their recent losses.
Today:
• UK: The CPI rate for December is forecast to have accelerated to +0.2% yoy from +0.1% yoy previously. However, as oil prices continued to tumble in December, we believe that the CPI rate could have remained stuck at 0.1% yoy. As such, a possible failure of inflation to accelerate could weaken GBP at the release.
• Germany: The ZEW survey for January is expected to show a decline in both indices. The increase in global risk sentiment by the turn of the year is expected to have driven the optimism of German businesses down. This could prove EUR-negative. Also, the final German CPI rate for December is forecast to confirm the preliminary estimate.
• Eurozone: Final CPI rate for December, expected to confirm the preliminary estimate and show the bloc’s inflation rate grew at the same pace as in November. Eurozone also releases its current account balance for November.
• US: The NAHB housing market index for January is expected to remain unchanged from the previous month.
• Speakers: Bank of England Governor Mark Carney speaks.
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