Early Friday, the market sees the first quarter (Q1) GDP and annualized figures of March month Retail Sales and Industrial Production from the National Bureau of Statistics of China at 02:00 GMT.
The data will be the key considering its period that includes the actual coronavirus (COVID-19) outbreak in the world’s second-largest economy that later-on jolted global markets. Another reason for the importance of the said figures can be attributed to the dragon nation’s recently positive surprises, by way of upbeat PMI and trade numbers.
Forecasts suggest, China’s Q1 GDP to have registered the first virus-led contraction of -9.9% QoQ and -6.5% YoY figures compared to +1.5% and +6.0% respective priors. Though, Retail Sales and Industrial Production (IP) data bear upbeat market consensus of -10.0% and -7.3% versus -20.5% and -13.5% earlier readouts in that order.
Westpac follows the market consensus while saying:
The median forecast for Q1 GDP is -6.0%yr, a huge swing from the +6.0%yr posted in Q4 2019. GDP growth has printed within 0.1ppt of Bloomberg consensus every quarter since 2015 so this will be an interesting test of market response, with the range of forecasts from -16%yr to +3.6%yr. Released at the same time is March industrial production (market f/c -6.2%yr), retail sales (market f/c -10%yr) and fixed asset investment (market f/c -15.0%yr YTD). The rebound from the depths of contraction in Jan-Feb should continue in the coming months.
TD Securities also holds a bearish view for the outcome:
As indicated by data for Jan/Feb, growth in Q1 20 weakened sharply; we expect a -9.5% q/q, -5.6% y/y contraction. Other metrics will likely post sharp y/y falls in March, extending declines registered in Jan/Feb, including industrial production, retail sales and fixed assets investment, which are all likely to weaken as deteriorating external demand, social distancing restrictions and consumer caution weigh on activity. The unemployment rate will be watched carefully by markets and policy-makers alike. After rising to a high of 6.2% in Feb, a further increase in the jobless rate is likely adding pressure for more official stimulus.
How could it affect the AUD/USD?
Given the first of its kind to show the full impact of the COVID-19 on global markets, the data will undoubtedly be the key for all traders. It should also be noted that the figures from China have recently flashed upbeat outcomes and hence markets await the actual release amid mixed clues. As a result, the outcome could provide wild swings to the markets but gains to the Aussie pair can’t be ruled out in a case of positive surprises.
Technically, a bounce from the monthly support-line, currently at 0.6315, pushes the pair to confront a 50-day SMA level of 0.6365. Though, 0.6400 and Wednesday’s high near 0.6445 hold the gate for further upside. On the downside, the quote’s drop below 0.6315 could call the March-end top near 0.6215/10.
Key Notes
AUD/USD extends recovery beyond 0.6350 ahead of China data dump
Chinese GDP Preview: How first corona contraction data will rock markets, regardless of reliability
AUD/USD Forecast: Eyes turn to Chinese GDP
About China’s GDP
The Gross Domestic Product (GDP) released by the National Bureau of Statistics of China studies the gross value of all goods and services produced by China. The indicator presents the pace at which the Chinese economy is growing or decreasing. As the Chinese economy has an influence on the global economy, this economic event would have an impact on the Forex market. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative ( or Bearish).
About China's Industrial Production
Industrial output is released by the National Bureau of Statistics of China. It shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, if high industrial production growth comes out, this may generate a positive sentiment (or bullish) for the CNY (and AUD), whereas a low reading is seen as negative (or Bearish) for the CNY (and AUD).
About China's Retail Sales
The Retail Sales report released by the National Bureau of Statistics of China measures the total receipts of the retailed consumer goods. It reflects the total consumer goods that the various industries supply to the households and social groups through various channels. It is an important indicator to study the changes in the Chinese retail market and reflecting the degree of economic prosperity. 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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