Intraday Market Thoughts

China Cuts Growth, Specs Squeezed on CAD

by Adam Button
Mar 6, 2017 16:00

China lowered its growth target on the weekend in a development that could cause some hand-wringing to start the week. Despite the news, early market moves have been negligible. CFTC positioning showed the speculative market getting wrong-footed in CAD and AUD.  On Friday, Yellen managed to propose up the dollar for 2 minutes before triggering a classic "buy the rumour sell the fact". The Premium Insights closed NZDUSD short at a 170-pip gain and allowing the EURUSD long to run.

Expect a healthy dose of China comments in the week ahead as the National People's Congress continues. The early news was that Premier Li Kequiang set a 2017 growth target of “around 6.5%, or higher if possible.” That's a downgrade from 7% previously.

The market has taken the news in stride so far but it will create some jitters that could turn into yen buying and commodity currency selling if any other growth-curbing news is announced..

A separate China headline from the PBOC's Yi said the yuan will remain 'relatively strong' in a slight jab at the US administration.

Other weekend news included a capital raise from Deutsche Bank. That's something the banking giant said it wasn't going to do but the 8-billion euro move to shore up capital will be seen as good news for the Eurozone. Scattered reports of a capital raise helped to boost the euro Friday and make it the best performer last week.

CFTC Commitments of Traders

Forex speculative futures positioning. + denotes net long; - denotes net short

EUR -51K vs -58K prior

GBP -71K vs -66K prior

JPY -50K vs -50K prior

CHF -12K vs -9K prior

CAD +30K vs +25K prior

AUD +52K vs +33K prior

NZD +3K vs +3K prior

Speculators buying AUD and CAD last week picked a bad time to do it. The loonie was the worst performer as the BOC dug in on neutral-to-dovish policy despite solid data. The Australian dollar also fell to a one-month low.


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