China’s Trade Slumps

Imports worse than forecast

China’s trade data for September showed imports contracting 8.5% y/y while exports declined a lesser 3.2%. Imports were much worse than economists’ expectations (-5.2%) but exports were only slightly worse (-3.0). As a result of the sharp drop in imports, the trade surplus widened to $39.65 billion from $34.83 billion.

In reaction to the weak imports, the Australian dollar weakened across the board, dropping 0.1% to 0.6785 versus the US dollar and 0.15% to 73.49 against the Japanese yen. AUD/JPY remains capped near-term by the 100-day moving average, which was tested, but held on Friday. It has capped prices on a closing basis since April 23.

AUD/JPY Daily Chart

AUD/JPY Daily Chart

MAS eases as Singapore avoids technical recession

In its semi-annual monetary policy statement, the Monetary Authority of Singapore (MAS) said it will reduce slightly the rate of appreciation of the SGD NEER policy band. There was no change to the policy band and no re-centering of the NEER. This is equivalent to a marginal easing as the MAS using the exchange rate as its monetary policy tool, and was perhaps not as aggressive as market expectations.

In its economic forecasts, the MAS cut its headline inflation to about 0.5% from 0.5%-1.5% previously while the 2019 GDP growth forecast was trimmed to 0%-1% from 1.5%-3.5%. It stated the measured adjustment was consistent with medium-term price stability, given the current economic outlook. It remains ready to re-calibrate monetary policy should the need arise.

Earlier, data had showed that the Singapore economy had avoided a technical recession, with 0.6% quarter-on-quarter growth, well below expectations of 1.5% expansion but a positive reading after posting a 3.3% contraction in Q2 and a 3.4% decline in Q1.

In response USD/SGD fell as much as 0.4% to touch 1.3677, the lowest since July 26, and is now trading at 1.3686. The 61.8% Fibonacci retracement of the July-September rally is at 1.3676 with the 200-day moving average below at 1.3654.

USD/SGD Daily Chart

USD/SGD Daily Chart

Holiday-impacted calendar

Holidays in Japan, the US and Canada have kept the economic calendar quiet, with Euro-zone industrial production for August the only major item on tap. It is expected to show contraction for a fifth straight month with a -2.5% y/y reading, worse than the -2.0% seen in July.

Speeches from ECB’s De Guindos and Bank of England’s Cunliffe complete the day.

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