China trade data signals further slowdown
Key markets turned lower yesterday after another poor result from the Chinese economy with the May trade balance showing exports to the rest of the world fell much faster than expected.
Chinese exports fell 7.5% year-on-year in May in a shocking turnaround from the 8.5% seen in April. Globally, a slowdown in demand of manufactured goods has hit export-driven economies like Germany and China.
Imports also fell, down 4.5%, but below the 8.0% drop forecast by the markets. The ongoing slowdown in Chinese imports has pressured commodity prices this year.
Aussie, yuan lower
The China news impacted markets with the Australian dollar and Chinese yuan the hardest hit.
As the Chinese yuan fell, the USD/CNY jumped to highest level since November last year, with the pair up 0.3%.
The AUD/USD fell from three-week highs and continued to drop in the overnight session as US equities lost ground on worries about the global manufacturing sector. The AUD/USD fell 0.2%.
Earlier, the AUD had gained as Reserve Bank of Australia governor Philip Lowe followed Tuesday’s rate hike with a warning that local rates might need to be lifted further to contain inflationary pressures.
BoC joins hike “surprise party”
Global financial markets were also pressured overnight by news of yet another surprise rate hike after the Bank of Canada defied expectations and raised official rates by 25 basis points to 4.75%.
The BoC had paused rates hikes in January – saying it needed time to assess the impact of higher interest rates on the Canadian economy – but strong consumer spending and persistent inflation caused the central bank to lift rates again.
The BoC decision also boosted the greenback with markets worried that the similar nature of the US and Canadian economies might make the US Federal Reserve more likely to raise rates when it meets next week.
Asia FX hit on poor China trade
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Calendar: 5 – 9 June
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