Chinese trade balance a concern
The Chinese trade balance offered a surplus of $61.4bn for October vs expectations of +$62.0bn while prior was $60.34bn. Exports were -6.9% y/y vs expected -3.2% (prior was -3.7%) while Imports were -18.8% y/y vs expected -15.2% (prior was -20.4%).
In fact, the Chinese economy recorded its highest trade surplus on record last month while imports were very alarming and highlighted that the world's second-largest economy struggles to boost domestic demand weighing heavily on a deteriorating economy.
AUD/USD bears lurking on Chinese news
On this basis, China could be facing its toughest year since the height of the financial crisis and could be headed for a heavy landing. The open is likely to price in such concerns in the commodity sector and in the Australian dollar. AUD/USD finished last week's session at 0.7036 after the Nonfarm Payrolls data that shaved 150 pips off the price.
However, Kit Juckes, economist at Societe Generale, explained that unless the Chinese economy slows more sharply and/or the CNY weakens sharply, the gut-reaction sell-off in commodity prices shouldn't go too far, but so long as commodity prices remain soft, AUD and NZD will remain vulnerable.
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