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Chinese Data Shows No Threat of Hard Landing

Last updated 11/9/2011 3:45 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Chinese data printed slightly lower to roughly in line suggesting that the country’s economy is beginning to slow but not at an alarming rate. Chinese inflation moderated significantly printing at 5.5% from 6.1% the month prior. Industrial Production was also lower at 13.2% vs. 13.3% eyed while Retail Sales dropped to 17.2% from 17.7% the month prior.

This was the lowest reading in consumer demand in three months but the falloff was not particularly sharp suggesting that so far China is able to engineer a soft landing. Market consensus in the wake of the data indicated that the PBOC is unlikely to  ease monetary policy into the end of the year given the relatively robust demand.

Overall the news had little impact on currency trade as the data came within expectations, but the slightly less forecast results  halted the rally in risk with EUR/USD topping out at 1.3850. The pair then started to slide into early European trade on concerns that yields on Italian 10 year bonds continued to rise despite the resignation of Prime Minister Berlusconi. The markets are wary that LCH Clearing will raise margin requirements on BTPs as their yields continue to widen relative to German bunds - a development that is sure to exert further downward pressure on the credit. Traders therefore were looking for ECB to provide further support for BTPs in order to stabilize the market. Without such support the downward pressure in the EUR/USD will quickly resume.

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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.