Chinese Economy Inspires Confidence

Weekend data from China was very close to forecasts with CPI fractionally lower than expected. The New Zealand dollar is slightly stronger to start the week while the yen lags in light trading. Japanese trade balance is on the agenda later with US and Canadian markets slowed by holidays.

Chinese weekend data gives early traders something to mull after the Australian dollar underperformance last week. Inflation ticked up to 3.2% y/y from 3.1% but it was softer than the 3.3% consensus. The government is targeting 3.5% so officials are likely comfortable with the current level.

The economy remains strong with consumers and factories expanding. Industrial production rose 10.3% y/y compared to 10.0% expected while retail sales rose 13.3% compared to the 13.4% consensus.

The market is complacent about liquidity and real estate risks to the Chinese economy, perhaps moreso than any time over the past two years. The confidence in Chinese growth may extend to fresh investment in resources.

The top item on the Asia-Pacific calendar at 2350 with is the release of September current account balance numbers from Japan. The consensus is for a 853-yen trade deficit in the month along with a 400B current account surplus. Neither report is likely to make waves in FX.

Another report to keep an eye on is Australian home loans at 0030 GMT with a 3.5% rise expected.

We send our deepest sympathies to the people of the Philippines and wish them the best.