China GDP growth slows in Q2

China Q2 GDP growth as expected, though lower than Q1

In this morning’s China data dump, Q2 GDP growth came in as expected but industrial production disappointed. The Chinese economy grew 6.7% y/y in Q2, a slower pace than in Q1 but was in line with economists’ forecasts. Industrial production for May on the other hand failed to match expectations, coming in at +6.0% y/y compared with estimates of 6.5% and a marked slowdown from April’s 6.8% increase.

In other data releases, June retail sales matched forecasts at +9.0% y/y, rising from +8.5% in May while fixed asset investment also equaled forecasts with a 6.0% y/y increase in May.

Source: Oanda MarketPulse

Equity markets fall; currencies stable

In a knee-jerk reaction, markets appeared to focus on the fact that Q2 growth was lower and industrial production missed. Given that the full impact of the first tariff implementations will not be truly felt until Q3, the growth outlook will become more cloudy going forward. AUD/USD slid to a low of 0.7408 though rebounded to near intra-day highs at 0.7434 in late trading.

In the equity space, China shares reacted negatively to the data with the China index sliding 1.72% as the specter of trade wars continues to dog local counters.  The Australia and Singapore indices dropped 0.32% and 0.56% respectively. Japan equity markets were closed for a holiday.

AUD/USD Daily Chart

Source: Oanda fxTrade

China says tariffs to have limited impact on inflation

In a press conference post-data, a China National Bureau of Statistics spokesperson Mao Sheng Yong said trade frictions are unlikely to have a significant impact on CPI and may see a subdued rise in prices in H2. On the outlook for the economy, Mao said the Bureau expects no change in China’s slow/steady growth path though acknowledged the trade sector faces challenges in H2.

Trade, earnings, teapots and the US dollar

In an apparent rebuff at the US and Trump’s trade aggression, Chinese Premier Li said, while meeting EU officials Juncker and Tusk, that China and the EU would uphold multilateralism and free trade as they exchanged offers on a bilateral investment treaty.

Euro-zone trade surplus to widen

The major events on the rest of today’s calendar feature Euro-zone trade balance for May, where the surplus is expected to widen to EUR19.7 billion from EUR18.1 billion, according to economists’ forecasts. US data includes retail sales for Jun, seen at +0.6% m/m which is lower than May’s +0.8% but with be the fourth consecutive month of positive month-on-month growth.

You can access the full data calendar on MarketPulse at https://www.marketpulse.com/economic-events/

Oanda Market Insights Episode 23

OANDA Market Insights podcast (episode 23)

OANDA Senior Market Analyst Craig Erlam reviews the week’s business and market news with Jazz FM Business Breakfast presenter Jonny Hart.

This week’s big stories: Trump NATO summit meltdown, Tory big beasts depart Cabinet, PM May defends Brexit white paper, Bank of Canada raises interest rates and the ECB releases the minutes from its June meeting.

Trade war and Trump European trip boost US dollar

GBP/USD – British pound slips over white paper blues

What sparked the dollar rally ? ( OANDA Trading Podcast on Money FM 89.3)

Markets higher as earnings season gets underway

Earnings season eyed as trade war fears remain

We’re seeing some risk appetite return on Friday even as concerns about trade remain front and centre and shows no signs of improving.

European equity markets are trading in the green on Friday, taking the lead from the US session on Thursday where tech stocks drove a rally that saw the NASDAQ hit a record high. With earnings season getting underway, investors will be looking for reasons to be more optimistic having spent months reading about the risks that a trade war poses to the economy.

JP Morgan, Citigroup and Wells Fargo will kick things off today and over the coming weeks, investors will be paying close attention not just to the results but also references to trade tariffs and the impact they are expected to have on future results, particularly those that have already been targeted in counter-measures taken or proposed against the US.

DAX steady as investors search for cues

Sterling slips as Trump warns of risks to US/UK trade deal

Trump has very much been in the spotlight this week, attending the NATO summit in Brussels before heading over to the UK to meet Prime Minister Theresa May. As ever, Trump was not afraid to express his views on the UK and Brexit ahead of the visit, warning that a trade deal with the US would not be possible under the model that May is seeking with the European Union, while also expressing his belief that Boris Johnson would make a good PM. This appears to have weighed on the pound in trade on Friday given the complications it could cause May and her team.

None of this will go down well with May – who has previously pushed strongly for this visit despite much protest – and comes at a terrible time for her but as Trump well knows, she is in a very weak position right now and is unlikely to fight back and, more importantly, he wants a Brexit that best suits the US. Whether Trump’s comments give more voice to dissenters among Brexiteers is yet to be seen but it certainly doesn’t help the PM as a trade deal with the US has long been touted as one of the benefits of leaving the EU.

First signs of tariffs impact in China’s June trade numbers

Chinese trade surplus increases as Trump plans more tariffs

Chinese trade data released overnight may be used as a source for Trump’s next attack on the world’s second largest economy, with exports having soared once again – rising 11.3% – increasing the surplus the country has with the US to $41.61 billion in June. While the main reason for such a spike is likely to be exporters front loading sales ahead of the tariffs being implemented, it’s likely that a stronger US economy and weaker yuan is also playing a role.

I expect this will be used as another example of the bad trade policies that Trump has repeatedly references but been unable to so far influence. Trump is attempting to force them back to the table with threats of another $200 billion in tariffs, something that has so far only been met with retaliation from China and others.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Live FX Market Analysis – 10 July 2018 (Video)

In this week’s webinar, Senior Market Analyst Craig Erlam discussed the latest Brexit developments as two members of her team resign after an apparently united and productive meeting on Friday. He also talks Trump, after the latest imposition of trade tariffs and ahead of his trip to the UK and the NATO summit, and previews the week ahead.

Craig also gives his live analysis on EURUSD (12:20), GBPUSD (15:03), EURGBP (17:50), AUDUSD (19:35), USDCAD (24:12), GBPCAD (26:19), NZDUSD (28:31), USDJPY (30:22), GBPJPY (32:25) and EURJPY (34:52).

GBP/USD – British pound steady on modest GDP growth

USD/JPY – Japanese yen dips to 7-week low, inflation reports next

Commodities Weekly: Gold saved by dollar’s retracement

What does Davis resigning mean?

The resignation of a key driver of the U.K.’s Brexit process is a blow for British Prime Minister Theresa May, but analysts believe she can survive the departure.

Brexit Secretary David Davis resigned Sunday evening, objecting to May’s withdrawal plan that seeks to maintain close economic ties with the European Union (EU), rather than a harder separation favored by Davis and other so-called “Brexiteers.” Former Housing Minister Dominic Raab was named as Davis’ successor on Monday morning.

Analysts are seeing the latest move as a “crunch point” for May, but that the vagaries of British politics and need for leadership just nine months before the official Brexit date could mean that she can soldier on.

CNBC

May Faces Difficulties Keeping Cabinet United Over Brexit

Theresa May is braced for her Cabinet to split when the European Union rejects her demands for a sweeping free trade deal, after her senior team agreed to put off the hardest Brexit decisions until later.Despite the Cabinet truce after months of internal division, three senior government officials said May will face her most challenging task keeping her ministers united when — as they expect — EU leaders formally reject the British approach.The U.K. prime minister won the backing of her ministers to ask the EU for the most ambitious and wide-ranging trade agreement the bloc has ever signed, after a marathon eight-hour meeting at her country house on Thursday.

Source: May Knows Danger of Cabinet Split on Brexit Still Lies Ahead – Bloomberg

DAX Edges Lower as German GDP Slows in Q4

24 hours of reconciliation

50 50 Chance of Halting Brexit

Opponents of Britain’s exit from the European Union are preparing a major campaign they say now has close to a 50:50 chance of stopping Brexit by blocking Prime Minister Theresa May’s divorce deal, a leading pro-EU campaigner said.With Britain scheduled to leave the EU in March 2019, opponents of Brexit are exploring various ways to stop what they say is Britain’s biggest mistake since World War Two.‘Best for Britain’, a campaign group which received a 400,000 pound donation from billionaire financier George Soros last year, hopes to convince lawmakers in the 650-seat parliament to block the withdrawal deal May aims to bring back from Brussels in October.

Source: Chance of halting Brexit now close to 50:50, says leading campaigner – Reuters

DAX Edges Lower as German GDP Slows in Q4

24 hours of reconciliation

Merkel Wants Overhaul of EU Finances After Brexit

Brexit offers the European Union an opportunity for a broad rethink of its financial set-up, German Chancellor Angela Merkel said on Thursday before an EU summit that will tackle the bloc’s future budget.Chancellor Angela Merkel addresses the German lower house of parliament Bundestag in Berlin, Germany, February 22, 2018. REUTERS/Axel SchmidtAddressing the Bundestag (lower house of parliament), Merkel made clear that the future of the EU would be a priority in her fourth term, provided a coalition deal between her conservatives and the pro-EU Social Democrats is approved by SPD members.“We need a new start for Europe,” said Merkel, adding the looming debate on a new budget for the 27-member bloc after Britain’s withdrawal in 2019 could lead to some major changes.

Source: Merkel eyes overhaul of EU finances for post-Brexit bloc – Reuters

Futures Flat After Hawkish Fed Minutes

Dollar maintains its firmer tone

Macron Inspires New UK Party Intent on Blocking Brexit

A new British party inspired by French President Emmanuel Macron’s movement launched a campaign on Monday to thwart Brexit by convincing MPs to block any EU withdrawal deal Prime Minister Theresa May can strike.Sandra Khadhouri, together with fellow Renew party members James Clarke and James Torrance, speaks at the launch of the new political party in London, Britain, February 19, 2018. REUTERS/Peter NichollsWith just over 13 months left until Britain is due to leave the EU, opponents of Brexit are exploring ways to stop what they call Britain’s biggest mistake since World War Two.The Renew party, founded last year after Macron’s En Marche! movement propelled him to power, said it would target pro-Brexit MPs in constituencies with high levels of support for EU membership.

Source: New British party inspired by Macron seeks to overturn Brexit – Reuters

Don’t go barking up the wrong tree in the Year of the Dog

Dollar Regains Ground Ahead of Fed Minutes