The beginning of the week was marked by two market movers from China: the trade balance and inflation.
China’s trade balance surplus increased beyond expectations, while import figures disappointed the expectations.
China reported that exports increased by 8,0% in April compared to the previous year (lower than the 10,4% expected), while imports rose by 11,9% (18,0% estimated) for a total trade surplus of $38.05 billion. The expectation was of $35.50 billion.
Weaker domestic demand is weighing on imports within the country and it continues to be a source of weakness for the Chinese trade balance.
However, foreign demand appears strong and should support the upward trend in exports.
According to reports from the National Statistics Office in the early hours of Thursday, the consumer price index in China rose to 0,8% in February compared to the previous year, with an increase of 2,5% registered in January. The inflation indicator did not reach the 1,6% targeted by 14 economists of the Wall Street Journal poll and remained well below the government’s 3% annual inflation target.
The news comes after the signing of an unexpected jump in currency reserves after months of falling and the first trade deficit recorded in China over the past three years.
China’s production price index rose 7,8% last month in one year. The figure, the maximum of September 2008, was higher than expected and up compared to 6,9% increase in January.
The week continued with the Bank of England, which decided to leave unchanged interest rates and confirm the Quantitative Easing program, the inflation target have been revised upwards while the growth rates have been revised downward.
England Central Bank, in the middle of the cyclone Brexit, was not surprised by analysts’ expectations and in addition to interest rate decisions and Quantitative Easing also published the report on inflation and the traditional Minutes.
The trade balance in March had a deficit of 4.9 billion pounds above the 2.65 billion of the previous month due in particular to the recent strength of the currency which, according to BOE’s quarterly report on inflation, will lead to a fall in prices on imports, thus reducing the inflationary pressure that in 2017 has been revised downward from 2% to 1,9%.
In March, industrial output (y/y) also exceeds expectations, up from 1,4% versus expected 2,1%, and manufacturing (y/y), which is down at 2,3% against the figure expected of 3,1%.
BOE’s decision made loose some land to the pound, which in the last month had achieved excellent performance while the euro, after the gains in the beginning of the week, seemed to attract new buyers. EUR / GBP cross moved during the week in 0,84 area.
Meanwhile, the US consumer price index confirmed the + 0,2% predicted by analysts. In the previous survey, inflation had fallen by 0,3%.
On an annual basis, however, inflation showed a + 2,2%, different from both the expected 2,3% and + 2,4% of the previous survey.
Market movers on the Economic Calendar of the week from the 15th to the 19th of May will feature only a few high-impact events.
The market will focus on inflation in the United Kingdom, Canada and the Eurozone, together with GDP in Japan.