The Australian dollar is under pressure as markets await Chinese GDP

Quick Recap

Friday is historical today in manner that is unusual. Certainly the rally in Europe and on Wall Street will help lift the ASX in early trade if the 22 point rally in the December SPI200 futures is any guide.

The reason Friday is more historical than usual is that traders, markets, are on tenterhooks awaiting the release of Chinese Q3 GDP. Obviously there has been much talk about the weakness of the Chinese economy recently and concerns were real enough for the Fed to delay the start of its rate hiking cycle at the September meeting.

So where the data prints today is super important. More important than usual in fact because China and Asia are just so important these days. If you are wondering why, I covered a nice note from HSBC over the weekend at Business Insider which really but the recent heightened focus into perspective.

Anyway back to the outlook for the data

Westpac says the market’s forecast is 6.8%. with a range of 6.4% to 6.9%. That 6.8% is only slightly below the CCP’s stated 7% growth target for China this year. Westpac itself is expecting a print showing annual growth of 6.8%.

Perhaps then the outcome won’t be too worrying for markets but a chart in Westpac’s Weekly preview highlights the weakening trend in Chinese growth is well entrenched.

We’ll know at 1pm AEDT today.Elsewhere it was a fairly quietish night although the Aussie dollar remains under pressure. I think that is both because of concern over China. But, also on Friday it was clear that when both UBS said a November cut is on the cards from the RBA and Bill Evans said that even though the RBA won’t rush they probably will cut if the other majors follow Westpac by jacking up mortgage rates.Rate cuts and weak China are a toxic mix for the Aussie. But there is obviously room for a reaction higher IF Chinese data surprises topside.Elsewhere on forex markets the US dollar gained a little ground against the Euro and Pound. The Yen is in the mid 119 region, the Canadian dollar a smidge weaker as we await the result of the election. Chinese data is going to be important for forex and the US dollar. Weak China might actually undermine the US dollar though as it could persuade some that the Fed will hold fire.On commoties it was fairly quiet for the main bellwethers I watch.  Nymex crude was a little higher but copper fell back to $2.40 a pound. Gold drifted a little lower as well but iron ore was up a tiny bit.

The overnight scoreboard (7.42am AEDT):

• Dow Jones Industrials +0.43% to 17,215
• Nasdaq Composite +0.34% to 4,886
• S&P 500 +0.46% to 2,033
• London (FTSE 100) +0.62% to 6,378
• Frankfurt (DAX) +0.39% to 10,104
• Tokyo (Nikkei) +1.15% to 18,096
• Shanghai (composite) +1.62% to 3,391
• Hong Kong (Hang Seng) +0.78% to 23,067
• ASX Futures overnight (SPI December) +22 5,268
• AUDUSD: 0.7256
• EURUSD: 1.1355
• USDJPY: 119.36
• GBPUSD: 1.5439
• USDCAD: 1.2903
• Nymex Crude (front contract): $47.26
• Copper (US front contract): $2.407
• Gold: $1,176
• Dalian Iron Ore (January): 371.5 (denominated in CNY)
• US 10 year bond rate: 2.02%
• Australian 10 year bond rate: 2.58%

On the day

Everyone is waiting for China today and besides the Q3 GDP data we also get Chinese retail sales (market expectation +10.8%), urban investment (+10.8% expected), and industrial production (+6% expected) at the same time. That’s huge.

There is nothing out in Australia today, indeed it’s a quiet week. Tonight we get the release of the Bundesbank’s monthly report in Germany and the NAHB housing market index in the US.

CHART OF THE DAY: AUDUSD

The Aussie dollar at0.7250ish isn’t weak. But, it has come under pressure from increased calls for an RBA cut worries about the real state of Chinese growth. While we won’t know the outcome of the RBA’s deliberation until Melbourn cup day in a couple of weeks Chiense data today is going to be huge.

So, it’s important to note that the Aussie has broken its 2-week up trend and looks biased toward 0.720 (my fast moving average). What it does after that however is likely to be resolved at 1pm with the Chinese data.

So the levels I am watching 0.7200/20 and 0.7277 and then 7325/40.