After getting out to a rough start in the morning, North American equity markets gained back some of their mojo in the afternoon session as red figures turned green just before lunch and stayed there until the closing bell. The US data misses this morning had more of an impact on the USD as the early gains by the EUR/USD and GBP/USD were maintained throughout, but are looking shaky after hitting major resistance levels toward the end of the trading day. As we transition in to the Asian trading session, China will be demanding most of the market’s attention as they will be releasing quarterly GDP figures along with Industrial Production, Retail Sales, and New Loans, among other things. The Chinese data dump will likely have a profound impact on not only the CNH, but also the AUD and NZD.
The NZD/USD in particular could be in jeopardy of a big move lower if Chinese GDP doesn’t perform as well as the consensus anticipates. Expectations aren’t really all that high with 7.0% being the median projection, and if it were to fall below that level, growth expectations in that region of the world could take a huge hit. It may also encourage another round of safe haven flows to the USD as the world prepares for the long prognosticated Chinese (hard or soft) landing.
The big move against the USD over the last 7-8 hours has brought the NZD/USD up to a declining trend line that has thwarted advances in this pair since mid-March. In addition, milk prices have been falling back from high levels (and there’s a milk auction tomorrow) which has only encouraged the NZD to depreciate of late, despite today’s rally. Considering the fact that China is a large importer of Kiwi milk products, a slowdown in growth could severely impact New Zealand’s economy as well as give the Reserve Bank of New Zealand plenty of reason to turn dovish on rates when they meet at the end of the month. When combining all of these factors, the NZD/USD may not have much topside life left unless China surprises the world with a strong showing in Q1 GDP.
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