U.S. Markets closed

Risk FX Under Stress as Chinese Growth Slows

Boris Schlossberg, Director of Currency Research, GFT

Weak Chinese economic data and a massive unexpected loss from JP Morgan kept risk FX under pressure in Asian and early European trade with EUR/USD coming within a few points of the 1.2900 barrier while Aussie drifted lower towards parity. JP Morgan reported a trading loss of more than -2 Billion dollars in credit derivatives as a result of hedge gone wrong by its CIO office in London.

Meanwhile in China industrial production weakened to it lowest level in nearly a decade printing at 9.3% versus 14.1% eyed. Retails Sales were also softened to 14.2% versus 15.1% forecast while fixed investment slipped to 20.2% versus 20.5% and CPI came in line at 3.4%. The data showed that Chinese growth is clearly slowing and may weaken further if the situation in Europe deteriorates further dampening demand from China’s largest export market.

The news weighed on risk with AUD/USD dropping to fresh yearly lows of 1.0200 with shorts eyeing the key parity barrier while EUR/USD was pushed lower as well but remained above the 1.2900 level as option defense kept the pair bid. With little economic data on the calendar in European trade traders will look at UK CPI and the release of EU Spring Economic growth and deficit forecasts as next catalysts to drive price action with risk FX remaining under stress.