Chinese Central Planners Roll Back 2015 Growth Expectations as the Global Economy Cools
China’s Premier Li Keqiang has cautioned that growth in the globes second largest economy is set to slow from its fever pace in 2015. China is expected to set its 2015 GDP target at about 7% following 7.5% in 2014. Risks to the outlook are mounting and he cited rising difficulties in achieving the ambitious targets set out by the Central Government. The major problem is the levels of nonperforming loans that are impairing banks’ lending capacity as the government increases lending standards to avert a crisis. Already traders are anticipating further monetary easing and reserve ratio requirement cuts for banks in an effort to keep lending strong. Stocks tumbled on the announcement, with the Shanghai Composite falling approximately 1% over the session and the Hong Kong Hang Seng dropping -1.15%.
In a stunning admission, an IMF Director stated that the Greek bailout was a concerted effort to protect French and German banks from collapse. This surprising disclosure confirms suspicions that Greece will likely be sacrificed once Europeans have recovered their funds and exposure to any potential Greek exit has been minimized. This highlights that this was one of the biggest transfers of private risk to public taxpayers as creditors were bailed out by tax revenues that should belong to the citizens of Europe, not international banking institutions. Although no rate cuts are expected in today’s ECB interest rate decision, JPMorgan has come out with a warning of further rate cuts in the pipeline if deflation invades the Euro Area or conversely Greece fails. EURUSD broke below 1.1100 yesterday, hitting new 12-year lows.
Counting from the beginning of the year, crude oil has experienced the biggest and quickest build to inventories ever on record after 8-straight weeks of increases. Yesterday’s 10.3 million barrel EIA figure was the largest gain for inventories since 2001. Crude oil briefly broke back below $50 per barrel on the announcement before surging higher after the release of the Federal Reserve’s Beige Book. Although the release itself contained very little new information, strong bidding in crude oil sent the energy product soaring over 4% higher following the quickest build to inventories ever on record. The possible rationale for the latest surge in prices could include growing instability in the Middle East after ISIS sabotaged a pipeline in Iraq and similar destructive activities occurred in Yemen.
NZDUSD Ascending Triangle Trading Opportunity
The New Zealand dollar has continued to rebound against the US dollar after reaching multi-year lows in February. The Reserve Bank of New Zealand has signaled its willingness to ease monetary policy further should the situation necessitate, but in the meantime has no imminent plans to change policy. This has seen the NZDUSD rally from lows with the uptrend intact since the beginning of February. The main driver of the pair will be USD with upcoming factory and employment data due today and tomorrow. NZDUSD is presently consolidating between resistance at 0.7610 and the uptrend line, setting up the pair in an ascending triangle technical pattern. The bias is to the upside with optimal position initiation on the trend line with expectations that a break above resistance will signal a larger, more volatile upside breakout. A move below the trend line is indicative of a reversal in the trend and breakdown in the pattern.