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Chinese data boosts markets

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China’s economic data boosted markets overnight as industrial output rose to 6.3 per cent in June from a 17-month low of 5 per cent in May. Retail sales data rose by 9.8 per cent year on year – a marked improvement on the 8.3 per cent economists forecast.

The Yuan strengthened against the US Dollar, having reached its highest level since last week. Some analysts see this uplift as a sign that moves aimed at reviving spending in the world’s second biggest economy are having some success. China’s data release boosted the Australian Dollar, which rose by almost 0.2 per cent to $0.7024.

Meanwhile, the US Dollar remained under pressure on expectations that the Federal Reserve will cut its benchmark interest rate. Last week, Fed Chair Jerome Powell and Chicago Fed president Charles Evans indicated rate cuts were needed to boost inflation.

Markets are pricing a 25-basis-point rate cut in July, along with an almost 20 per cent chance of a 50-basis-point cut. The focus this week will be on US retail sales figures due out tomorrow, 16 July.

In Europe, the single currency has been stable of late. However, the prospect of further easing from the European Central Bank will probably limit any upside in the Euro. The minutes from the latest monetary policy meeting released last week said policymakers were prepared to ease policy amid rising uncertainty. Looking ahead, German ZEW data are also due tomorrow, followed by the Eurozone Consumer Price Index (CPI) on Wednesday, 17 July.

In the UK,  Brexit-related uncertainty continues to linger amid no notable fresh developments. While investors are awaiting the outcome of the Conservative Party leadership contest, the Pound will face a tough test this week with labour market indicators due tomorrow, CPI on Wednesday and retail sales on Thursday. Bank of England Governor Mark Carney is also due to speak tomorrow.

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