China Trade Figures Provide Brief Relief – Exports Fall at a Less Marked Pace

Highlights

• Exports from China fell at a less marked rate in August, suggesting improving demand.
• Nonetheless, exports remained well below more regular levels, leaving investors in limbo on the Chinese economic outlook.
• Philip Lowe will deliver his final speech as RBA Governor amidst the current macroeconomic backdrop.

China Trade Terms Improve but Remain a Market Concern

This morning, the Chinese economy came into focus due to Tuesday’s unsettling Services PMI. Recent Caixin PMIs indicated potentially weaker exports due to weak overseas demand.

However, exports were down 8.8% year-over-year, with imports falling by 7.3% in August. Exports declined at a less marked pace than in July. In July, exports slid by 14.5%, with imports falling 12.4%. As a result, the dollar trade surplus narrowed from $80.60 billion to $68.36 billion.

Economists had forecasted the US Dollar trade surplus to narrow from $80.60 billion to $78.00 billion. Notably, they had projected imports and exports to fall by 9.8% and 8.8%, respectively, year-over-year.

Earlier this morning, Australian trade data for July reflected deteriorating trade terms. The trade surplus narrowed from A$10.268 billion to A$8.039 billion. Exports declined by 2.0%, while imports increased by 2.5%.

AUD/USD Reaction to China Trade Balance

Before the China trade figures, the AUD/USD rose to a pre-stat high of $0.63851 before falling to a low of $0.63667.

However, in response to the trade figures from China, the Aussie Dollar rose to a post-stat high of $0.63711 before falling to a low of $0.63666.

This morning, the Aussie Dollar was down 0.20% to $0.63667.

Up Next

Philip Lowe will deliver his final speech as the Governor of the RBA. Investors should look for comments relating to the economic outlook and monetary policy. The markets are betting on the RBA ending its monetary policy tightening cycle.

US labor market numbers and FOMC speeches will also draw interest later today. After the hotter-than-expected US ISM Non-Manufacturing PMI, tighter labor market conditions would refuel Fed rate hike bets.

However, investors must track Fed speeches today. FOMC members Bowman, Harker, and Fed Vice Chair John Williams will deliver speeches. We expect the Fed Vice Chair to wield significant influence. Hawkish Fed comments, supportive of further rate hikes, would weigh on riskier assets.