Another Seesaw Day for FX as China Data Lifts Risk -But Will the Move Reverse?

Market Drivers April 17, 2019
Chinese data beats
UK CPI a bit cooler
Nikkei 0.25%
Dax 0.05%
Oil $64/bbl
Gold $1275/oz.

Europe and Asia:
NZD CPI 1.5% vs. 1.7%
CNY GDP 6.4% vs 6.3%
GBP UK CPI 1.9% vs. 2.0%

North America:
CAD CPI 8:30

It's been yet another seesaw night of trade as Chinese data surprised to the upside and reversed risk flows in late Asian session dealing.

The day started with cooler New Zealand CPI which printed at 1.5% vs. 1.7% eyed and promptly send kiwi below the .6700 figure as markets became convinced that RBNZ will begin to lower rates at its next meeting. But the selloff did not last as risk FX rebounded after Chinese data proved to be better than expected.

Chinese data, spurred by Q1 stimulus rose across the board with GDP printing at 6.4% versus 6.3% retail sales coming in at 8.7% versus at 8.4% and Industrial Production jumping to 8.5% from 5.9% forecast. The news instantly put a bid into Aussie which climbed all the way to .7200 before finally finding some sellers. Although the data was unambiguously bullish for Chinese economy it remains to be seen if it proves to be so for antipodeans. The rise in Chinese demand is now driven by internal factors and may have little additional positive impact on Australian and New Zealand economies which are starting to suffer from negative wealth erosion due to declining housing markets.

Tomorrow's AU labor data will be key as to whether the unit can hold the .7200 figure or begin to fall back to range lows as RBA clearly noted in its minutes that it is sceptical that job growth could continue at the current pace.

With no eco data on the calendar, the FX flows will once be dominated by equity market action. Equities have been mildly positive all night but have failed to make much upside progress this week, setting us up for a possible profit taking move as the day proceeds. If equities do drift lower they will likely pull USDJPY down with them. The pair burst through 112.00 barrier in early Asian trade, but the rally failed to go anywhere and if the pair can't take out the swing high at 112.25 it will be the fourth failure this year to clear this key level.

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