China published mixed economic data
Economic Data
Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes available the value of a currency pair will change to reflect a potentially new equilibrium created by traders. This information that changes the value of a currency pair can ultimately come in many forms, with economic indicators or data being primary drivers.Why Economic Data Matters in ForexEconomic data is an important barometer that investors can use to measure the performance of an economy. This in turn can influence currency rates.For example, the stronger the economic data, the more likely growth will rise in the country, causing a currency to strengthen. If Gross Domestic Product (GDP) growth in the United States is high, this will help cause the US dollar to rise in value.The reverse is also true. Typically, weaker economic data can forecast a slowing of growth. What traders’ attempt, when trading economic data is to measure how economic indicators are perceived relative to expectations.Before nearly every economic release, the market generally prices in is the median expectation reflected by analysts and economists. These known variables are simply expectations, and the unknown is the actual release. Since currency pairs can move significantly based on new data, traders are always trying to anticipate where the actual figures will come in upon release.Changes to economic data will also filter down to potential changes to interest rates by a central bank. Overall, economic announcements from the United States and Eurozone are heavily watched as they will influence the perceptions of market participants which help drive interest rates and other monetary policy by the Federal Reserve or European Central Bank (ECB) respectively.
Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes available the value of a currency pair will change to reflect a potentially new equilibrium created by traders. This information that changes the value of a currency pair can ultimately come in many forms, with economic indicators or data being primary drivers.Why Economic Data Matters in ForexEconomic data is an important barometer that investors can use to measure the performance of an economy. This in turn can influence currency rates.For example, the stronger the economic data, the more likely growth will rise in the country, causing a currency to strengthen. If Gross Domestic Product (GDP) growth in the United States is high, this will help cause the US dollar to rise in value.The reverse is also true. Typically, weaker economic data can forecast a slowing of growth. What traders’ attempt, when trading economic data is to measure how economic indicators are perceived relative to expectations.Before nearly every economic release, the market generally prices in is the median expectation reflected by analysts and economists. These known variables are simply expectations, and the unknown is the actual release. Since currency pairs can move significantly based on new data, traders are always trying to anticipate where the actual figures will come in upon release.Changes to economic data will also filter down to potential changes to interest rates by a central bank. Overall, economic announcements from the United States and Eurozone are heavily watched as they will influence the perceptions of market participants which help drive interest rates and other monetary policy by the Federal Reserve or European Central Bank (ECB) respectively.
Read this Term noting a slowdown in a year-over-year comparison, but some of the data exceeded expectations. The Chinese renminbi has been on the offensive against the US dollar
US Dollar
The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purely fiat currency, i.e. not backed by a physical commodity. The former gold standard aligned to the US dollar, made both gold and silver the legal-tender coinage of the USA, with the guarantee that 1 USD could be converted to one and a half grams of pure 24 carat gold. However, the gold link was eventually abolished by President Richard Nixon in 1971. Since the gold standard was cut, the US dollar has become the world’s number one reserve currency.This means foreign nations possess large amounts of their cash reserves in USD, accounting for approximately 65% of the world’s foreign exchange reserves.How to Trade the US Dollar?The US Dollar is traded in a variety of ways, most notably on the foreign exchange (forex) market versus other currencies; traded as pairs. Any retail broker offers exposure to the USD in many exchange pairs, given its popularity and liquidity. The USD is involved in the majority of the most traded forex pairs, such as the EUR/USD, the USD/JPY, the GBP/USD and the USD/CHF, known as the “four majors”, and the “commodity pairs”, i.e. AUD/USD, USD/CAD and the NZD/USD.
The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purely fiat currency, i.e. not backed by a physical commodity. The former gold standard aligned to the US dollar, made both gold and silver the legal-tender coinage of the USA, with the guarantee that 1 USD could be converted to one and a half grams of pure 24 carat gold. However, the gold link was eventually abolished by President Richard Nixon in 1971. Since the gold standard was cut, the US dollar has become the world’s number one reserve currency.This means foreign nations possess large amounts of their cash reserves in USD, accounting for approximately 65% of the world’s foreign exchange reserves.How to Trade the US Dollar?The US Dollar is traded in a variety of ways, most notably on the foreign exchange (forex) market versus other currencies; traded as pairs. Any retail broker offers exposure to the USD in many exchange pairs, given its popularity and liquidity. The USD is involved in the majority of the most traded forex pairs, such as the EUR/USD, the USD/JPY, the GBP/USD and the USD/CHF, known as the “four majors”, and the “commodity pairs”, i.e. AUD/USD, USD/CAD and the NZD/USD.
Read this Term for the past week, bringing USDCNH back to test the lows of the past six months.
The economy grew by 1.6% last quarter after 0.2% previously. However, the GDP growth was 4.0% y/y - the lowest since the second quarter of 2020. Industrial production added 4.3%, markedly better than the expected 3.7%.
December retail sales data disappointed with growth slowing to just 1.7% y/y, the lowest since August 2020.
Weakness in domestic demand data has not stopped the demand for the Chinese renminbi, which is testing the 6.35 mark for the second month. Since the beginning of December, the pair has bounced out of this area. Earlier in May 2021, we also witnessed a prolonged reversal near this level. The USDCNH traded steadily lower from January to May 2018 but turned to the upside at the start of the trade wars.
The yuan has settled well, consolidating in a narrow range since late October, which has created the potential for a resumption of the trend. A firm consolidation below 6.35 at the end of the week or the month would be an essential signal for starting a new downward wave. However, we cannot rule out the possibility of another bounce from these levels for the time being.
This article was written by FxPro’s Senior Market Analyst Alex Kuptsikevich.
