Chinese Exports Roar, Markets Skeptical

Last week ended with a massive US dollar rally on non-farm payrolls but the new week begins with extraordinarily strong Chinese trade data. There has been no early rebound in the euro as it lags early while the loonie leads the way in light trading. Final revisions to Japanese GDP are up next.

The euro is down 20 pips to start the week and at a fresh 12-year low at 1.0824. The focus later in the week will be industrial production but at the moment the US dollar is in charge. Non-farm payrolls weren't as strong as the 150-200 pip moves on Friday would indicate but it underscores the near-insatiable appetite for dollars at the moment.

The main weekend news was the remarkable rise in February Chinese trade as exports rose 48.3% y/y compared to 14% expected and imports were down 20.5% compared to 10% expected. That translated into a trade surplus 10-times the $6B expected.

The key caveat in that data set is the month. Markets are extremely skeptical of any Chinese data from February because it's extremely difficult to adjust for the Lunar New Year. Still, taking Jan and Feb combined, exports rose 15% compared to the government's 2015 full year target of 6%. That may largely reflect a pickup in US exports and a weaker yuan.

The drop in imports, however, is a concern. It speaks to softer domestic demand and it may also show that factories are ordering less raw materials in response to soft global orders. Overall, the wild swings continue to sharpen the focus on China. 

In the near-term the focus will be on Japan with final Q4 GDP not expected to be revised from the 2.2% annualized pace in data at 2350 GMT. Ten minutes later, PM Abe delivers a speech and at 0100 GMT BOJ Deputy Gov Nakaso speaks. Much later, at 0500 GMT, the February Japanese eco watchers survey is due.