Chinese data will again receive the close attention of investors this week, particularly after a raft of disappointing indicators witnessed not only last week but throughout much of the year-to date.
Trade Balance figures, inflation data and loans data (released last week) all failed to inspire confidence in a Chinese turnaround.
This week, Chinese Industrial Production and Retail Sales data will be in the spotlight and if recent indicators are anything to go by, markets should probably brace themselves for the likelihood of some further disappointment on the Chinese economic front.
Industrial Production is expected to slip to 4.3%, though Retail Sales is forecast to recover somewhat to 4.2% from the lowly 3.1% prior reading.
These figures, as well as those for Fixed Asset Investment, are due for release on Tuesday.
Any further indicators of economic malaise in China will test the patience of policymakers in Beijing, who thus far have shown much restraint despite the dire economic trajectory.
US bond yields and the greenback have continued to track higher which has spelled bad news for the gold price.
The precious metal is edging closer to a re-test of stern support at circa the US$1900 level. This key level of support was tested twice in June and on both occasions, buyers stepped in which formed the basis of a gold recovery.
The DXY (Dollar Index) has tracked higher for the past four weeks and if that trend continues for a fifth week, then key support at US$1900 could face another stern examination sooner rather than later.
Oil in consolidation
Oil is in consolidation mode after seven straight weekly gains. WTI has started the week trading around the US$82.30 level during Asian trading hours.
Upbeat outlooks for oil demand from the likes of OPEC+ and the IEA are standing the oil market in good stead, this despite a stream of disappointing economic indicators from China.
The hope appears to be that demand from places like India will fill the void created by sluggish demand from the Chinese market. If China does happen to mount an economic turnaround this would add to the upside potential of the oil market. But that remains a big ‘if’.
In currencies, GBP was buoyed by a solid GDP print, but gains were limited due to rising US bond yields assisting the USD. The USDJPY rate is edging towards that key 145 level which could induce some action from Tokyo to shore up the faltering Yen.
The AUDUSD has slipped below the US$0.6500 level on Chinese worries and in response to a stronger USD. Traders of the Aussie Dollar will be keeping an eye on the RBA Minutes (Tuesday) to see if the perceived hawkishness of Governor Lowe is shared by other board members.
Meanwhile, the FOMC Minutes later this week could be a source of some volatility even though the odds of any action by the Fed at the September meeting currently remain very low
