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Week Ahead: April 13

Short Description

The big trading opportunity we are looking for to this week is the effect of Chinese GDP on the Australian dollar. China was the first economy to suffer from the coronavirus outbreak. The rest of the world will be watching to see what they might expect in their own economies. The Australian dollar is heavily affected by China so we talk about why and what we could expect to see. As always, we also go through the weekly economic calendar.

Video Script

Hi Everyone,
There’s going to be a lot of interest this week in how well the Chinese economy performed during the coronavirus outbreak when the country releases GDP figures on Friday. I think the data will impact most markets but my attention is going to be on the Australian dollar and I’ll explain to you why very shortly. I will also rundown the highlights in the week’s economic calendar but before I do, can I ask that if you’re enjoying this video, click the like button and please make sure to subscribe so we can keep bringing you more videos.
So it’ll be a slow start to the week because most European markets and a few others will be closed for Easter Monday. China trade balance data for March will offer a clue about what to expect in the GDP figures. US retail sales won’t capture the entire drop in consumption from March but are still expected to turn negative. The Bank of Canada just cut interest rates last week so I’m not expecting fireworks from their meeting. If you’re trading the dollar it will be important if US jobless claims have already topped out. Then as well as Chinese GDP on Friday we have an IMF meeting where we can expect the usual inaction and stating the obvious.
So why the Australian dollar Rich? Well first off – let’s just say the Aussie as us traders like to call it – has been absolutely crushed in 2020. In the first quarter of this year the Aussie dollar / US dollar currency pair dropped fifteen hundred pips from 0.70 to a seventeen year low of 0.55. It’s been a similar scene in other pairs like the Aussie-yen. In the last couple of weeks, it’s been a different story and there has been a good rebound.  So, then the question is, ‘Has the trend changed to a new uptrend or are we about to rollover again to re-test those decade lows’?
And how does China GDP play into this? Well, China is Australia’s biggest customer for its raw material exports. Fears for China’s economy during the coronavirus outbreak in Wuhan hurt the Aussie in the first quarter. The subsequent rebound in the Aussie has coincided with China getting on top of the outbreak and restarting economic activity. Now of course there are other factors at play like interest rates in Australia being cut to near zero and massive government stimulus programs. But all else being equal, the better the GDP figure for China in Q1, the easier it will be for China to expand its orders for Australian commodities. I’m confident China’s juggernaut economy will recover quickly, but quite how quickly is what will be a big driver for the near term performance of the Australian dollar.
Good luck with trading this week, and please remember to like and subscribe.

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