The British monthly GDP is announced on Friday at 09:00 MT time.
Greatest fall in history of China’s GDP
China’s gross domestic product shrank by 6.8%. It’s the lowest level that was witnessed since 1992, notably the start of official reports.
What does it mean? Are things so bad in China?
Not really! It wasn’t a surprise for anybody as the country had the national lockdown. Actually, the GDP releases quarterly. So, let’s look at more recent data. The March industrial output showed the signs of recovery. It fell only by 1.1%, 7 times less than expected! This is an encouraging rate.
“First in – first out”, commented the Chief China Economist. According to him, 90% of factories are fully operational now.
Also the 800 billion dollar stimulus package is on the way to support the economy as investments decreased by 16.1%.
Ok, suppliers are back to work. What about consumers?
Here’s the problem. Retail sales plummeted by 15.8%. Consumers are not ready to spend their money yet. Even if they are ready, there is the social distancing restriction, that makes shopping or eating in a restaurant unworthy. However, these tough rules will be eased soon. It’s expected that the consumer behavior will be normalized to the third quarter of 2020. Moreover, the external demand is quite low too as other countries are still on lockdowns.
Don’t miss the chance to gain!
After the China’s GDP release USD/CNH rose sharply from 7.06935 to 7.08430. Recent highs are 7.08915 and 7.09365.
AUD/USD fell from 0.6383 to 0.63245 because of the poor Chinese GDP data. The recent bottom line is on 0.62665.
The main market tendency today is that the US dollar is rising against its major peers and riskier assets such as stocks and oil are plummeting.
The US unemployment claims are out on Thursday at 15:30 MT time.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.