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5 Mar 2014
Asia EM Express: China growth target set at 7.5% at National People's Congress
FXStreet (Łódź) - The highlight in the Asian session was the opening of China's National People's Congress at which the premier Li Keqiang presented the list of economic goals for the country. One of the most important announcements was the plan to pursue free trade agreements with Australia, South Korea and the United States.
Furthermore a 2014 growth target of 7.5% was established, in line with market expectations. The inflation target was set at 3.5%, ">unchanged from last year.
Prashant Newnaha Asia-Pacific Macro Strategist at TD Securities comments: “Given that GDP growth is expected to be 7.5% for ‘longer’, TD sees this target as supportive for the Asian region and commodity currencies in particular.”
Economic data
The HSBC China Services PMI expanded slightly to 51.0 in February from 50.7 in January, Markit reported. HSBC chief economist for China Qu Hongbin commented that this result points to a stabilization of the Chinese service sector at a low level, but that “combined with the weaker manufacturing PMI, the overall strength of economic growth is moderating and this is starting to weigh on employment growth.”
"Beijing policy makers can and should fine-tune policy to avoid growth deceleration in the first half of the year," he suggested.
Meanwhile in the Philipinnes the February year-over-year CPI came in at 4.1%, slightly down from the January reading of 4.2% and below expectations of 4.3%. Core inflation slowed to 3.0% from 3.2%.
As “the balance of economic risks remains tilted toward inflation” Tim Condon from ING projects “two 25bp BSP policy rate hikes by year end.”
Technicals
The USD/CNY daily FXStreet Trend Index is slightly bullish, with the OB/OS Index overbought. RSI sat at 87.6452 at the last close, and has headed lower to 20.3421 so far today. Daily 2-StDev Volatility Bandwidth expanded at 0.0321 - 0.52%, with ATR (14) at 0.0126 pips. The 1D 200 SMA was at 6.1034, while the 1D 20 EMA was at 6.1002.
Michael Every, Rabobank Head of Financial Markets Research, Asia Pacific views the steady drop in the Chinese yuan against the US dollar, which had begun at the end of February, as no accident. They believe it was a “PBOC-generated event, and one that has tried to send two messages (but which has actually sent three).”
“The first message is that the PBOC wants to make it clear that the CNY’s trading band is going to be widened further ahead from the current 1% above and below the daily fixing rate.”
“The second -very strong-message is that currency speculators should understand that this looming wider CNY trading band does not mean that the PBOC wants to see an even faster rate of CNY appreciation ahead as a result.”
“The third -inferred -message is that the Chinese economy is likely to slow much further ahead.”
Furthermore a 2014 growth target of 7.5% was established, in line with market expectations. The inflation target was set at 3.5%, ">unchanged from last year.
Prashant Newnaha Asia-Pacific Macro Strategist at TD Securities comments: “Given that GDP growth is expected to be 7.5% for ‘longer’, TD sees this target as supportive for the Asian region and commodity currencies in particular.”
Economic data
The HSBC China Services PMI expanded slightly to 51.0 in February from 50.7 in January, Markit reported. HSBC chief economist for China Qu Hongbin commented that this result points to a stabilization of the Chinese service sector at a low level, but that “combined with the weaker manufacturing PMI, the overall strength of economic growth is moderating and this is starting to weigh on employment growth.”
"Beijing policy makers can and should fine-tune policy to avoid growth deceleration in the first half of the year," he suggested.
Meanwhile in the Philipinnes the February year-over-year CPI came in at 4.1%, slightly down from the January reading of 4.2% and below expectations of 4.3%. Core inflation slowed to 3.0% from 3.2%.
As “the balance of economic risks remains tilted toward inflation” Tim Condon from ING projects “two 25bp BSP policy rate hikes by year end.”
Technicals
The USD/CNY daily FXStreet Trend Index is slightly bullish, with the OB/OS Index overbought. RSI sat at 87.6452 at the last close, and has headed lower to 20.3421 so far today. Daily 2-StDev Volatility Bandwidth expanded at 0.0321 - 0.52%, with ATR (14) at 0.0126 pips. The 1D 200 SMA was at 6.1034, while the 1D 20 EMA was at 6.1002.
Michael Every, Rabobank Head of Financial Markets Research, Asia Pacific views the steady drop in the Chinese yuan against the US dollar, which had begun at the end of February, as no accident. They believe it was a “PBOC-generated event, and one that has tried to send two messages (but which has actually sent three).”
“The first message is that the PBOC wants to make it clear that the CNY’s trading band is going to be widened further ahead from the current 1% above and below the daily fixing rate.”
“The second -very strong-message is that currency speculators should understand that this looming wider CNY trading band does not mean that the PBOC wants to see an even faster rate of CNY appreciation ahead as a result.”
“The third -inferred -message is that the Chinese economy is likely to slow much further ahead.”