Early Thursday, the market sees the second quarter (Q1) GDP and annualized figures of June 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 dragon nation’s gradual recovery from the coronavirus (COVID-19)-led economic halt. Another reason for the importance of the said figures is recently positive surprises, by way of upbeat economics, from the world’s largest commodity user. Furthermore, the recent risk-on mood, backed by the hopes of virus vaccine, becomes an additional reason as to why the Chinese GDP data becomes the key for the market sentiment.
Forecasts suggest China’s Q2 GDP to have overcome the virus-led contraction of -9.8% QoQ and -6.8% YoY figures with +9.6% and +2.1% respective market consensus. Further, Retail Sales and Industrial Production (IP) data also bear positive forecasts of +0.3% and +4.7% versus -2.8% and +4.4% earlier readouts in that order.
Westpac follows the market consensus while saying:
The rebound in economic growth is gathering speed (Q2 GDP%yr: prior: -6.8%, market f/c +2.4%; June industrial production f/c 4.8%yr after 4.4%yr in May. The consumer’s spending appetite is seen returning with retail sales picking up from -2.8%yr to 0.5%yr in June. Similarly, fixed asset investment YTD in June will likely benefit from a further uplift in momentum (prior: -6.3%yr, market f/c:-3.3%yr).
On the other hand, FXStreet’s Yohay Elam says:
Investors are set to initially react to the headline figure. Economists' forecasts range from an annual contraction of around 3% to an expansion of around 4%. The consensus of 2.1% is, therefore, based on a wide array of opinions. Stocks will likely cheer a robust GDP figure, despite suspicions about the veracity of the data. Slow growth would be disappointing, potentially sending shares in Shanghai and S&P 500 futures lower. If Beijing shocks by reporting another quarter of annual contraction, markets may expect more stimulus and react in a counter-intuitive manner – rising on such stimulus hopes rather than falling.
How could it affect the AUD/USD?
Given the headline numbers from the largest customer’s recovery from the pandemic, the data will undoubtedly be the key for all traders, mainly for AUD/USD. 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 considering the virus resurgence in some parts of Asia and tussle with the US. 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.
Key Notes
AUD/USD: Again pierces 0.7000 with eyes on Aussie employment, China GDP
Chinese Q2 GDP Preview: Three uncertainties open door to surprises, volatile marketreaction
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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