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Aussie, Kiwi Traders Like China Trade Numbers; Asian Stock Traders Cautious About Trade Deal

James Hyerczyk
Updated

China released better-than-expected January trade balance data early Thursday. The news seemed to have a positive effect on the Australian and New Zealand Dollars, but failed to add to this week’s strength in the major Asian stock markets. Share traders in Australia, however, liked the report as the numbers added to the strength already being generated by optimism that a U.S.-China trade deal would be reached in a timely manner.

Early in the trading session, China released January trade balance data that beat consensus expectations in both the Chinese Yuan (CNY) and U.S. Dollar (USD) terms. Looking at the CNY side, the trade balance figures came in at 271.42 billion compared to 395 billion CNY reported in December. As far as the USD side is concerned, the trade balance beat expectations of $33.50 billion surplus by coming in at $39.16 billion.

Exports were strong in January, but imports are still faltering. Exports rose by 13.9% on the year in January, well ahead of market expectations of a rise of just 3.8%. Additionally, December’s rise was only 0.2%. Contrarily, imports fell by 1.9%, matching the forecast, but was still better than the previous month’s decline of 3.1%.

Aussie and Kiwi traders seemed to be impressed enough by the news to fuel a short-covering rally. Traders reacted positively to the news because the numbers could have been worse given current U.S.-China trade tensions. Furthermore, the numbers were based on the time period between holiday seasons in the West and the start of the Lunar New Year period in Asia so they may have been distorted somewhat.

Asian Stocks Trade Cautiously

With the start of high-level trade talks between the United States and China, Asian market traders are taking a cautious approach to the stock market on Thursday. However, under the cautiousness, there is some optimism. This is being fueled by the news that Chinese President Xi Jinping is “scheduled to meet” with high-level members of the U.S. delegation this week in Beijing. The members of the delegation include U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.

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Investors feel that we’ve reached the critical point in the negotiations with both sides engaged in very serious discussions. This could be an indication that both sides are close to a deal. Traders have been betting all week that the negotiations will end this week with a deal that will avert a further escalation of the trade dispute, and hopefully put an end to the months-long tensions.

This article was originally posted on FX Empire

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