China starts 2016 on a slow note – TDS

By FXStreet Annette Beacher, Chief Asia-Pac Macro Strategist at TDS, notes that the Chinese industrial production and retail sales sagged in Jan-Feb, disappointing market expectations and briefly weighing on the commodity currencies at the open.

Key Quotes

“Industrial production eased from 6.1% to 5.4% YTD (mkt 5.6%) while retail sales eased from 10.7% to 10.2% YTD (mkt 11%). Investment was more buoyant at 10.2% (mkt 9.3%) but was ignored.

We are not fans of this artificial Jan-Feb average, and prefer to wait for March data for clarity on real activity, however, using Q1 averages for RS and IP we see Q1 GDP easing from 6.8% to 6.7%. Bloomberg’s GDP proxy ended 2015 at 6.69%, eased to 6.32% in Jan and bounced to 6.8% in Feb. Again, taking the Q1 average, predicts that GDP eases from 6.7% in Q4 to 6.6% in Q1.

Over the weekend (before the data) as reported by BBG, PBoC Zhou said “Excessive monetary policy stimulus isn’t necessary to achieve the target,” reiterating past comments that monetary policy is prudent with a slight easing bias. “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy.”

While 2016 has started on a cautious note, it is consistent with the …read more

Source:: FX Street