Several economic reports were released this week which point towards a global economy much weaker than expected or hoped for. Forex traders need to take not of economic developments around the globe as it will have an impact on currency pairs and can explain erratic movements. This is especially true when a currency pair rallies sharply or sell-off which is made up of two currencies from economies in a downtrend.
China started this week by cutting its one-year lending rate from 5.35% to 5.10%. This signals that the PBOC is worried about the Chinese economy and attempts to stop the contraction visible in economic reports released by the world’s second largest economy behind the Eurozone. More economic reports released out of China yesterday showed retail sales, industrial production as well as fixed assets investments excluding rural all much weaker than economists expected.
Retail sales in China rose by 10.0% in April as compared to last year while economists predicted an increase in retail sales to 10.4%; retail sales rose 10.2% in March. Industrial production rose 5.9% in April as compared to last year. This was below what economists expected which was 6.0%, but it was above the 5.6% growth rate reported in March. Fixed assets investments excluding rural has dropped to 12.0% in April which is far below the 13.5% reported in March.
New Zealand card spending contracted by 0.7% in April; this surprised many as economists expected an increase of 0.5%. More bad news were added this week by the UK which reported a 2.4% drop in BRC like-for-like sales. Economists expected a slowdown to 0.6% in April from the 3.2% increase reported in March. US Jolt job openings fell to 4,994 which is much smaller than the 5,140 expected by economists. Eurozone industrial production contracted by 0.3% in March which adds to the slowdown witnessed around the globe.
US retail sales were released yesterday and showed no gain in April. Economists expected an increase of 0.2%. Retail sales excluding auto sales rose only 0.1% which shows that the US consumer is not spending. Viewing this week’s global economic data shows that overall there is widespread weakness which means that many currency pairs should be trading lower than current levels. Forex traders can profit from this by staying informed about fundamental news.