China giveth and China taketh away. The world’s no. 2 economy and Australia’s no. 1 trade partner recently announced some monetary stimulus that supported the Aussie, but now sends global worries with weak trade data.
The publication, that came during the weekend, could weigh on the A$ in the wake of the new trading week.
China reported a huge decline of 19.9% in imports for January. Yes, nearly 20%. And the fall in imports comes from something that Australia exports: commodities.
This is a huge fall as a drop of only 3.2% was on the cards. It was compounded with a drop of 3.3% in exports, contrary to expectations for a rise.
There are 3 caveats:
- Chinese New Year: China is entering the Year of the Goat. The celebrations depend on the moon and these lunar changes always mean a distortion of data around the new year.
- Sharp fluctuations: Jumps and plunges are not too uncommon in these figures.
- Invoicing problems: In the past, there were some issues with fake invoices that companies produced, so the data is not necessarily very accurate. However, the current Chinese government is clamping down on corruption, so data has probably become more accurate this time.
In any case, a big drop in commodities is not good news for Australia. The RBA already cut the interest rate and we will also hear from Governor Stevens about the prospects for another move in March.
More: AUD Still En-Route To 0.75 as RBA To Cut Again Next Month – UBS
