Daily Forex Fundamental Overview

Fundamental Analysis

CNY

“Exports in September look a little better than expectations. But if you factor in seasonal factors, I don’t see much improvement in global demand”

- Ma Xiaoping, HSBC economist

China’s imports dropped, while exports remained feeble in September due to weak global demand, suggesting the world’s second biggest economy continued to falter into the end of the year. While exports declined less than economists had predicted, the data indicated that China’s third-quarter growth numbers due for release next week would likely come against Beijing’s target of about 7% for the whole year. According to the General Administration of Customs, Chinese exports dropped 3.7% in September from a year earlier in US Dollar terms after a 5.5% plunge in August. At the same time, imports in September plummeted 20.4% from a year earlier, compared with a 13.8% slump in the preceding month. As a result, the country’s trade surplus rose to $60.3 billion in September from $60.2 billion a month earlier.

China’s September exports continued to falter due to weak global demand. The International Monetary Fund predicts the world’s economy to expand 3.1% this year, its slowest pace since the global financial crisis. That is a downgrade from the IMF’s 3.3% growth forecast in July. China is likely to miss its 2015 foreign trade target of 6% annual growth, down from the 7.5% growth goals it set in 2014 and 8% in 2013, both of which it failed to reach, economists said.

AUD

“In particular, the depreciation over the past couple of years is playing an important role in helping the economy adjust to the wind-down of the boom in mining investment”

- Philip Lowe, RBA Deputy Governor

Australia’s business confidence bounced back last month following the Federal Government’s leadership change, the NAB’s monthly business survey showed. The index of business conditions came in at above-average +9 in September, while confidence rose by 4 points to +5. The sub-index of sales dropped by four points to +15, remaining firmly above its long-term average. At the same time profitability declined by two points to +8. However, there was a notable improvement in the outlook for hiring, with the employment measure climbing five points to +4, reaching the highest level in four years. Moreover, the survey’s index of capital expenditure increased to +7 in the reported month, supported by the services sector. The Reserve Bank of Australia has been anticipating a recovery in spending by companies outside of the mining sector, which is faltering due to weaker commodity prices.

Meanwhile, RBA Deputy Governor Philip Lowe reiterated the central bank’s opinion that the lower level of the Aussie Dollar over the past few years has helped the nation’s economy to withstand fading of the mining investment boom. Over the last year the Australian Dollar has depreciated from around $0.90 versus the US peer to below $0.70 in recent weeks and has also declined dramatically on a trade-weighted basis over the same period.

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