Talking Points:
- AUD/USD extended a three-day decline following the release of the Chinese Trade Balance figures
- The trade surplus further contracted in November, both exports and imports declined
- A further retreat in trade from this second largest economy lowers global growth and commodity producer demand views
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The Australian Dollar slowly extended its decline against its US counterpart following the release of the November Chinese trade data. In Yuan terms, China’s Trade Balance missed the 407.50 billion estimate coming in at a surplus of 343.10 billion. This is a contraction from October’s 393.20 billion surplus. Exports fell -3.7 percent (YoY) compared to the -2.9 percent forecast. At the same time, China’s imports declined -5.6 percent (YoY) versus the -11.3 percent consensus – notably marking the smallest loss in almost one year.
The more closely watched Dollar-based figures similarly fell far short of their mark. The anticipated increase from October’s positive $61.6 billion balance to the $64.15 billion consensus was met with a much smaller $54.1 billion figure. Exports dropped more than expected at a -6.8% rate (versus -5.0% anticipated) while imports dropped -8.7% (against -11.8% projected).
The Aussie’s eventual reaction to the data was a slide that extended Monday losses with Australian front-end government bond yields.This is perhaps explained by the import figures. China is Australia’s largest trading partner. Though imports declined the smallest amount since December 2014, the implications of tempered demand for Australian commodities and goods bodes poorly for the country. Year-over-year, China imports from Australia dropped -13.6 percent from a year ago.
Shortly after the data was released, the AUD/USD slipped alongside 2-year Australian bond yields. While the import reading was relatively smaller, overall China’s trade figures reflect a curbed demand for Australian exports and the tempered exports may signify a cooling global economy. This is the fifth consecutive month where the trade data yielded negative percentages from both the export and import figures. In other words, since June the world’s second largest economy has been cutting back in global trade.
