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Australian Dollar Surges as China Trade Smashes Forecasts

Australian Dollar Surges as China Trade Smashes Forecasts

David Cottle, Analyst


Talking Points:

  • The Australian Dollar got a boost following some consensus smashing Chinese trade data
  • The thesis that China is now not just stabilizing but picking up steam is very much intact
  • Imports suggest rising internal demand

The Australian Dollar jumped on Friday following a blockbuster set of Chinese trade data for January.

Exports leaped 7.9% in US Dollar terms, smashing estimates of a 3.3% rise and more than erasing the grim memory of December’s 6.1% slide. Imports rose 16.7%, again hugely ahead of forecasts and suggesting that internal demand remains robust.

The data was even punchier in Yuan termshowever. Exports rose 15.9% on-year. This was a massive beat of the 5.9% rise expected and will be read as a major positive for the Chinese economy. Imports surged 25.2%, a full ten percentage points above average forecasts. The overall USD-terms trade balance was $51.35 billion. That too was well above expectations ($48.85 billion) but still some way below October’s peak of $61.29 billion.

Still, these are strong numbers which ought to bode well for China and proxy assets such as the Australian Dollar. Sure enough they did, at least in the Aussie’s case, with AUD/USD rising to 0.76569 after the numbers from 0.76386 just before their release.

A spring in its step: AUD/USD

Chart Compiled Using TradingView

Asian stocks have hit eighteen month highs this week, largely on optimism that the Chinese economy is stabilizing and strengthening. These data won’t spoil that view at all.

Earlier in the session the Australian Dollar had all-but shrugged at the release of a “something for everyone” Statement on Monetary Policy from the Reserve Bank of Australia. It trimmed near-term growth forecasts but left some pretty upbeat medium-term calls intact, doing nothing to alter the markets’ essential prognosis that while Australian interest rates need go no lower, they may not rise soon either.

Would you like to know more about financial-market trading? The DailyFX webinars are a great place to start.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.