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Chinese Growth Lowest Since GFC

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The Australian dollar jumped higher on the news that Chinese growth had fallen less than expected yesterday; GDP growth came in at 7.3% against a forecast of 7.2%, though this was lower than last quarter’s 7.5% and was the weakest growth number since the GFC. Industrial production bounced back after the previous 6.9%, reading at 8.0% which was seen as a positive for Australian commodity exporters. The Australian dollar jumped three quarters of a cent after the announcement, but later retraced this move ahead of today’s CPI release.

The CPI data showed a much expected moderation in the inflation rate, due to the removal of the carbon tax – which put downward pressure on utilities and energy prices. The fall in the Australian dollar also came a little two late in the quarter to provide an impact on imported goods. Quarterly CPI rose at 0.5%, while the year on year figure was down to 2.3% after 3% last time. The RBA’s chosen measure of inflation – the Trimmed Mean – fell slightly below expectations at 3.5%; this is right in the middle of the RBA’s 2-3% target band and would not create any drastic calls for a rate movement. The majority of the increase came from food, alcohol & tobacco as well as housing.

For those wanting some direction on the future path of Australian interest rates it will be a long 3 months until the next data point.

Tonight focus will shift to the UK and America, firstly with the BoE/MPC to release the committee’s votes on the interest rate (11:30 server time). After the recent fall in oil prices and the decline in inflation expectations, calls for interest rate rises have been played down; committee members are expected to remain unchanged from the previous release where two members (McCafferty and Weale) voted for rate increases and the remainder for no change.

The US will follow Australia in releasing its monthly CPI figures today (15:30 server time) – both the Core CPI and CPI figure are expected to rise from last month, at 0.2% and 0% respectively, despite the fall in commodity prices and the rise of the US Dollar. Just after this (17:00 server time), the Bank of Canada will decide its key interest rate; as has been the case for some time the bank is not expected to make a move on rates while Inflation remains benign at 2.

Focus will shift back to Asia on Thursday morning when RBA Governor Glenn Stevens will be speaking at the AGM for APCA (00:00 server time). Stevens is unlikely to announce anything drastic given today’s inflation rate, however as central bankers are always inclined to do – be on the lookout for jawboning of the Australian dollar and any discussion of Property prices and the introduction of Macro Prudential policy. New Zealand CPI follows shortly after (00:45 server time) – economists expect a reading of 0.5% growth, quarter on quarter. Asian trading should wrap up with the release of HSBC Flash Manufacturing PMI (04:45 server time) which is expected to be unchanged at 50.2.

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