China's Economic Signals Point to Potential Shift in Momentum

•  On Friday, the focus was on the Chinese economy.
• The figures for industrial production and retail sales indicated an increasingly positive demand environment.
• Yet, house prices continued to pose a challenge.  

 Chinese Economic Indicators Show Improvement

The Chinese economy drew attention on Friday, with the CPI Report indicating deflation. However, more recent data brightened the outlook.

Key indicators such as retail sales, industrial production, fixed asset investment, unemployment, and house prices were closely watched.

House prices saw a 0.2% decline year-over-year in November, consistent with predictions. Nevertheless, the market initially showed little reaction despite concerns about the housing sector.

In contrast, industrial production surpassed expectations, rising by 6.6% year-over-year in November compared to 4.6% in October, exceeding the forecast of 5.6%. Fixed asset investment remained stagnant at a 2.9% year-over-year increase in November, similar to October's figure.

Retail sales also improved, increasing by 10.1% year-over-year, compared to 7.6% in October, although falling short of economists' forecast of 12.5%.

The latest data suggests an uplift in Chinese economic activity in November, potentially reducing expectations for further stimulus from Beijing. However, additional economic indicators, such as trade data, will be necessary for a comprehensive understanding of the demand sources. The November private sector PMI surveys pointed to weak global demand, which could sustain deflationary pressures.

Overview of AUD/USD on Thursday

Before the release of the indicators, the AUD/USD dropped to a low of $0.66924 before climbing to a high of $0.67034. In response to the data, the Australian dollar initially declined to a post-stat low of $0.66962 before rebounding to a high of $0.67036. This morning, the Australian dollar was up 0.08% at $0.67012.

Focus on European and US Private Sector PMIs

Private sector PMIs from Europe and the US also warrant attention. Trends in private sector activity could impact demand and affect commodity currencies. A surge in private sector activity would signal an improved demand environment and an elevated need for raw materials.