Oceanic Dollars Capped by Risk Despite Better Chinese Trade Data

THE TAKEAWAY: Stronger than expected imports, exports > Continued Chinese economic strength, more demand for AU, NZ goods > AUD, NZD gains mildly

The Australian and New Zealand dollars were relatively unchanged after July Chinese trade balance reached a 29-month high as market volatility continued to draw buying into safe haven assets. Records for trade balance, imports and exports all beat their respective expectations and previous data.

Despite an expected fall in Chinese exports due to the slower pace of economic recovery, in major US and European markets, consumers in Asia led consumption of Chinese goods. Chinese exports to Japan grew to 27.2% in July on a year-over-year basis from 20.0% previously, suggesting a strong yen and continued recovery efforts were fueling general consumer spending. The largest change was led by India, increasing to 32.2% YoY from 13.9% previously, also due to the strengthening of the Rupee over the last month. Exports to the ASEAN bloc was recorded at 23.5% from 18.1% previously.

Although imports from Australia slowed from 34.2% in June to 32.7% in July, a jump of imports from Canada, rising from 47.5% from 37.6% helped fill the decrease. Commodities trade data from the Customs General Administration showed a continued higher demand of iron ore of 54.55 million tons in July versus a comparable 51.09 million tons previously. China’s rising consumption of soybeans from 4.30 million tons to 5.35 million tons currently helped push its imports with Brazil from 3.9% to 46.9%.

The Australian and New Zealand dollars remained weak into the Asian session as investors showed continued concern and continued to buy into safer assets including the Japanese yen and the US dollar. At the time of writing, the Aussie dollar was off 0.132% against its American counterpart, while the Kiwi was losing 0.406% against the greenback. Although the Australian ASX 200 was up a respectable 3.00% at 4155, US equity futures all pointed moderately negative, with the benchmark S&P500 off 0.119%.

AUDUSD 5 minute chart; vertical line indicates time of release. Chart generated with FXCM Strategy Trader.

NZDUSD 5 minute chart; vertical line indicates time of release. Chart generated with FXCM Strategy Trader.