China's Trade Balance Overview
China’s General Administration of Customs is set to release the January month Trade Balance report sometime during mid-Asia this Friday.
Forecasts suggest the Chinese trade surplus to shrink to ¥261.58 billion from ¥329.27 billion. Further, Exports are expected to have dropped by 6.3% versus +9.0% prior while Imports are likely to rise 19.1% compared to 17.7% previous on an annualized basis.
In a case of the Trade Balance report in the US Dollar (USD) terms, the surplus is seen lower at $38.64 billion from $47.29 billion last while exports and imports both are likely to mark further weakness, arriving at -6% and -4.9% compared to 16.9% and 7.9% respective priors.
While the Lunar New Year holidays in China will impact the actual readings, traders will be keen to watch for the coronavirus impact on the trade data. Having that in mind, Westpac said, “China trade data for Jan is due, with consensus for exports around -4%yr, imports -6%yr and a trade surplus of $40bn. The actual number could be well wide of this, given huge seasonal factors, with lunar new year unusually early this year and of course the coronavirus emerging over the month.”
How could it affect the AUD/USD?
At the press time, the AUD/USD pair is seen extending losses below the 0.6730 after the RBA’s quarterly statement of monetary policy cut the near-term growth forecasts while citing coronavirus risk. Earlier during the day, the RBA Governor also considered coronavirus to have a larger negative impact on the Australian economy.
On the data release, the Aussie could attempt a bounce back towards a five-week-old falling trend line, at 0.6790, if the trade numbers beat expectations. Should the data disappoint, the renewed downside in the pair could pick up the pace, sending the rates back to the yearly low surrounding 0.6680.
Key Notes
AUD/USD extends losses as RBA's SoMP cuts GDP forecasts
RBA Lowe: Coronavirus risks to Australia greater than SARS
About China's Trade Balance
The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows a trade surplus, while a negative value shows a trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has an influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.
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