Tag: China

China Recap: The Good And The Bad

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


A little more than a week ago, China released its data for second quarter GDP growth alongside other important data sets that, entwined, give us a glimpse into the health of the world’s second largest economy and a framework for FX strategy in the Asian space.

China’s second quarter GDP growth hit 6.7% for the second quarter year-on-year, the same growth rate as the first quarter and moderately higher than the 6.6% called for in Reuters’ consensus poll. The major contributor to GDP growth was consumption, a rather positive sign that consumers are becoming a more prominent engine in the Chinese economy. This was further enforced when China’s retail sales posted growth of 10.6% in June compared to 10.0% in May.

But on the flip side, there were some negative signs as well, and plenty of them. GDP growth was, indeed, driven by consumption but the growth in the services sector, or the tertiary industry as it is referred to, was 7.6% Year on Year. That is simply not enough to accommodate China’s weakness in manufacturing and not exactly in line with China’s growth plans. Continue reading "China Recap: The Good And The Bad" →

China's Policy About To Hit The Dollar?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


China has resorted to its old habit of stimulating the economy by allowing the Yuan weaken. But while the "remedy" has yet to work its wonders. The side effects, are already emerging—inflation is on the rise.

The People's Bank of China, China's central bank, ought to decide - support China's manufacturing or curb inflation.

What will the Chinese central bank do? And equally important, how will the dollar respond?

China's Central Bank: The Logic

In order for us to try and gauge the next move by China's central bank, we must delve first into the logic. In other words, what is the central bank considering? Now, that's not an easy undertaking, by any stretch of the imagination. Nevertheless, the task has turned a tiny bit simpler. Last month, in an interview with the Caixin Weekly, the Governor of the People's Bank of China, Zhou Xiaochuan, outlined the central bank's policy.

Here are the points to focus on: Continue reading "China's Policy About To Hit The Dollar?" →

Speculative Bets On The Aussie To Rise?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Ever since China's stock woes escalated it seems all commodity-related trades have sunk under water. The Aussie took a nose dive vs. the two dominant safe havens, i.e. the US Dollar and the Japanese Yen, and turned range bound vs. the Kiwi.

In the not too distant past, there had been some signs of a tentative recovery in the Aussie. However, those signs quickly became mixed messages, offering nothing but false hope. Simply put, China continued to lose its grip on its financial system. Now, as always, China has been the wild card for the Aussie. We've already elaborated on the fact that China can't keep the Yuan high; at best, it can only slow its depreciation. But can China's latest actions be the springboard for the Aussie to rally? Continue reading "Speculative Bets On The Aussie To Rise?" →

Capital Controls Won't Save the Yuan

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


China's financial markets are caught in what some are calling "the perfect storm." It's been roughly six months since the situation dramatically escalated. As of yet, there are no signs of a calming sea.

Thus, there are more and more very vocal voices calling for China to enforce capital controls to save the Yuan. The intent is to keep the Chinese dragon from losing its balance.

This move may not mesh well with China's plans to liberalize its economy, but it's really not a bad idea. While it might help stem the crisis in China's financial system, it's unlikely to save the Yuan from plunging lower. Continue reading "Capital Controls Won't Save the Yuan" →

Market Perception, China And Why Gold Is Going Higher

Posted on by The INO.com Team

The carnage continues in China with the market closing after 30 minutes of trading when it reached the 7% trigger point to close the market. That weakness spilled over into the European and US markets this morning, all of which are sharply lower.

One bright spot this morning is the that gold seems to be finding new friends that have pushed it up to its best levels in 2 months.

Why is all of this happening?

It all boils down to market perception. Perception is perhaps the most powerful force in the marketplace and the perception right now, no matter how irrational, is that investors do not want to own stocks. Investors were clamoring to buy Amazon when it was approaching $700 a share, now this morning Amazon is down almost $80 from its recent highs. Did Amazon's business model suddenly change? No, perception changed. Investors do not want to own Amazon right now as they think they can buy it lower.

The other big change, of course, is the fact that the Fed is no longer printing money and using quantitative easing to goose up the market. The fact that easy cheap money is no longer available is a psychological impediment to the market going higher. Continue reading "Market Perception, China And Why Gold Is Going Higher" →