China Helps the Risk Trade

Last updated 12/11/2009 3:56 AM ET (GMT -5) 0 Comments - Add your comment

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Boris Schlossberg

Director of Currency Research, GFT

Chinese economic data continued to show strong economic expansion giving lift to the recovery trade and improving risk flows in late Asian and early morning European trade. Chinese Industrial Production expanded at a very strong 19.2% rate versus 18.2% eyed while inflation rose by 0.6% - the first increase in ten months indicating that deflationary pressures are receding.

Although other measure of economic activity such as Trade Balance (19.1B vs.24.0B) and Retail Sales (15.8% vs. 16.6%) were lower than forecast, the overall tone of the data was overwhelmingly positive demonstrating that China continues to expand strongly and remains the primary engine of global growth.

The news sparked a small bid in high beta FX with euro climbing to 1.4750 and pound recovering the 1.6300 handle as the night progressed. Cable also benefited from Moody’s announcement that it will not downgrade UK sovereign debt helping to relieve some of the concerns that have dogged the pair this week.

Attention will now turn to the US Retail Sales data due 13:30 GMT. The market anticipates core Retails Sales to rise by 0.5% from 0.2% the period prior and if the news surprises to the upside it should support the continuation of the overnight flows with USD/JPY possibly targeting 90.00 figure once again.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.