Positive Chinese & UK Data: Short-Term Outlook

In today’s article, we will take a look at the outcomes of the Chinese Data in addition to a look at the UK inflation data, what does it mean for both central banks (PBoC & BOE) and the effect on the Chinese Yuan and the British Pound of the short term.

Positive Chinese Data

Contrary to the market expectations, the Chinese data came in much better than expected, including the industrial production, fixed asset investment and most importantly the retail sales. The entire data suggests that the recent devaluation of the Chinese Yuan and the PBoC policy is finally showing a light at the end of the tunnel

Outcomes

Actual

Forecast

Prior

Industrial Production

6.2%

6.1%

6.1%

8.3%

8.3%

8.3%

10.8%

10.2%

10.0%

The most important outcome in today’s figures was the retail sales, which posted the biggest increase this year, rising by 10.8% after a notable slowing down throughout the year, which reached a growth rate of 10.0% only. Moreover, the Industrial Production unexpectedly advanced to the highest level in three months, rising to 6.2% after two months of a stabilization around 6.1%.

CNH Devaluation

Since the devaluation of the Chinese Yuan is showing some positive effect on the Chinese data, there is a high possibility for further declines ahead. USD/CNH is stabilizing around 6.9 for the last few weeks. It should not be surprising if the pair continues to rise further and its seems that 7.0 is not far away. Yet, there will be a political implication of such move, as the US will not be pleased with such level. Therefore, volatility is likely to rise in the coming weeks. Yet, it seems that USD/CNH is on a one-way bet trend.

UK Inflation Advanced Further