USD/CNH scales above 6.7500 despite upbeat China GDP data

The USD/CNH has overstepped the critical resistance of 6.7500 despite China’s National Bureau of Statistics (NBS) having reported upbeat Gross Domestic Product (GDP) (Q4) data. The Chinese economy has expanded by 2.9% on an annual basis while the street was expecting an expansion of 1.8%, lower than the prior release of 3.9%. On a quarterly basis, the economy has remained steady but managed to avoid contraction as investors were expecting a de-growth by 0.8%.

Apart from that, annual Industrial Production (Dec) has been reported stronger than anticipated at 1.3% vs. the expectations of 0.5% but lower than the former release of 2.2%. The annual Retail Sales have contracted lower than expected by 1.8% against the estimate of -7.8%.

Broadly, the reopening reforms by the Chinese administration by shrugging-off uncertainty over rising Covid-19 cases are supporting a rally in commodities ahead. Usually, reopening measures boost liquidity in the economy, which initially strengthens the commodities, as witnessed in the case of reopening by other Western nations in CY2020 after the Covid-19 pandemic.

Economists at Société Générale think that China’s reopening will be bullish for commodities. They further added that “China should import more LNG which would put some pressure on gas prices and positive sentiment on the Copper markets will be significant. Oil prices have already displayed a bumper recovery

Meanwhile, the S&P500 futures have surrendered gains recorded in early Asia and have turned negative, portraying escalating caution among the market participants. The return on 10-year US Treasury bonds has jumped above 3.53%, which is weighing on the risk appetite of the market participants. The US Dollar Index (DXY) is aiming to recapture Monday’s high at 102.20 as the risk aversion theme is gaining traction.