When is China data dump and how could it affect US dollar?

China Economic Data Overview

Early Monday, the market sees the annualized figures of April month Retail Sales and Industrial Production from the National Bureau of Statistics of China at 02:00 GMT. Investors would emphasize more on the data considering the latest reflation chatters.

Industrial Production (IP) and Retail Sales figures bear down forecasts of 9.8% and 24.9% on a YoY basis versus 14.1% and 34.2% respective priors. Further, Fixed Asset Investment is also likely to weaken from 25.6% previous readouts to 19% on a Year-To-Date (YTD) basis for the said month.

Westpac follows the market forecasts while saying:

Momentum will remain strong with capacity and income gaining at a robust pace. Industrial production growth is seen easing to 10.0%yr from 14.1%yr in March, retail sales softening to a still stellar 25.0%yr growth pace from 34.2%yr in March (massive lockdown impact still in the y/y comparisons) and fixed asset investment 20.0% year to date vs Jan-Apr 2020.

How could it affect the markets and US dollar?

As upbeat China trade numbers battle chip shortage, today’s Industrial Production figures could portray an upside surprise amid an economic recovery in the West. The data will be looked upon inflation concerns and hence any more strengthening of the data from Beijing could test the latest risk-on mood, which in turn can help the US dollar index (DXY) to recover some of the recent losses. On the contrary, traders should be relaxed in case of mixed data and could keep the US dollar heavy.

While China data can indirectly affect the US dollar, via risk signals, the Australian dollar (AUD) has a stronger correlation with the scheduled figures due to the Canberra–Beijing trade ties. Hence, firmer data may help the AUD/USD to stay on the front foot even as the anticipated US dollar strength could pose a downside risk for the Aussie pair.

That said, AUD/USD consolidates Friday’s gains around 0.7760 by the press time while the DXY prints mild gains near 90.40 by the press time.

Technically, AUD/USD remains above a confluence of 50-day and 100-day SMA around 0.7710-20, suggesting another attempt to cross the resistance around 0.7820, comprising multiple tops marked since January. However, sluggish oscillators indicate weakness in trading momentum to break the key hurdle to the north.

Key Notes

AUD/USD Forecast: Aussie up with gold and equities recovering

AUD/USD remains on the way to 0.7820 hurdle ahead of China data dump

About China's Industrial Production

Industrial output is released by the National Bureau of Statistics of China. It shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, if high industrial production growth comes out, this may generate a positive sentiment (or bullish) for the CNY (and AUD), whereas a low reading is seen as negative (or Bearish) for the CNY (and AUD).

About China's Retail Sales

The Retail Sales report released by the National Bureau of Statistics of China measures the total receipts of the retailed consumer goods. It reflects the total consumer goods that the various industries supply to the households and social groups through various channels. It is an important indicator to study the changes in the Chinese retail market and reflecting the degree of economic prosperity. In general, A high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.