- CHINA Q2 2019 GDP +6.2% Y/Y
- CHINA 1H GDP RISES by 6.3% Y/Y
Every time we are faced a major economic number it comes as a huge sigh of relief even when the print comes out as expected.
The China GDP data was very much in line with consensus confirming the markets view that the economy continues to slow, and while GDP touched 27 years low in Q2, the on consensus print does lessen the market fears that China's economy is headed for a hard landing.
As such risk assets will respond favorably but it's hard to escape the economic realities that the US-China trade war is having on global economies.
Dovish Fed feedback loop into Asia Central Banks
The Fed easing provides a bit of policy wiggle room for region central banks, but the impact is likely to be less impactful than in previous easing cycles to the trade war uncertainty that will continue to weigh on export and cloud investor decision.
The Pboc will need to do the heavy lifting
While the Fed offers up more local central bank policy wiggle room given that rates are already so low in Australia, New Zealand, Japan, Thailand, Taiwan, and Korea, and with little signs of willingness to delve into unconventional policy, with interest rates running so low a further drop will probably have only a marginal impact on business or consumer spending behaviour.
Oil Markets
No rise in oil markets on the China GDP print as price action remains heavy due to the unwinding of tropical storm Barry risk premium, no major escalation news from the Gulf and of course the overhang from the gloomier industry reports which all nudged oil demand forecasts back a bit.
The Ringgit
The Ringgit is opening on a favourable tone as oil prices remain supported by gulf tensions and the run of weekly US inventory draws. Factor in a broadly weaker US dollar and the momentum for yield-seeking investors and it’s a great start to the week. Traders will be focused on the deluge of Fed speak this week to dial in their July Fed rate cut expectation.
The Korean Won
The USD/KRW is moving higher breaking above the fundamental 1180 level. Clearly, the ongoing friction between South Korea and Japan is not helping the sentiments. Dollar demand is reportedly on the back of Importers
The Thai Baht
After the BoT announced measures to curb inflows last week, the USD/THB has moved from 30.60 to 30.90 on this macroprudential based policy.
The new cabinet will give a policy statement next Week (July 25). There growing chatter around Bangkok that fiscal stimulus will be on the agenda to the tune of THB 100 billion
The Rupiah
USD/IDR broke below 14000, a level the pair struggled to break in April. This move is on the back of Indonesian President Jokowi's comments on plans for tax cuts and more reform. This IDR rally despite the Bank Indonesia is likely to cut the 7-day reverse repo rate by 25bps in the July 18 meeting.