In Q3, the Chinese economy grew by 1.3%, showing an increase from the 0.8% growth seen in the second quarter.

Highlights

• The Chinese economy saw a year-over-year expansion of 4.9% in Q3, a decrease from 6.3% in Q2.
• An increase in economic activity became noticeable towards the end of Q3, indicating the effectiveness of stimulus measures implemented by Beijing.
• Later today, it's important to take into account speeches from the Federal Reserve and the visit of US President Biden to the Middle East.

Chinese Economy Shows Resilience in Q3 The Chinese economy outperformed expectations, sparking optimism about an economic recovery. Year-over-year, the economy expanded by 4.9% in Q3, compared to 6.3% in the previous quarter, surpassing the forecasted growth of 4.4%. Notably, economic activity strengthened in the third quarter, with a 1.3% increase quarter-on-quarter, exceeding the predicted growth of 1.0%.

Positive Signals from Retail Sales and Unemployment Data Retail sales and unemployment statistics indicated a notable upturn in September. Retail sales saw a 5.5% increase year-over-year, up from 4.6% in August, while the unemployment rate decreased from 5.2% to 5.0%. Additionally, industrial production rose by 4.5% from the previous month, aligning with August's figure.

Impact on the Australian Dollar Ahead of the release of the Chinese economic data, the AUD/USD reached a pre-data high of $0.63670, subsequently dropping to a low of $0.63509. The aftermath of the data unveiling saw the Aussie dollar initially decline to a post-statistic low of $0.63510 before rebounding to a high of $0.63751. This morning, the Australian dollar exhibited a 0.09% increase, reaching $0.63705.

Market Expectations for Housing Sector Data and Fed Speeches Following the surprising US retail sales report, investor interest is set to turn to US housing sector data and Federal Reserve speeches on Wednesday. Given recent market movements, the speeches of voting members Michelle Bowman, Patrick Harker, Christopher Waller, and John Williams are likely to sway market expectations regarding Fed rate increases.

Caution Amidst Middle East Conflict Market participants are advised to closely monitor developments related to the Middle East conflict. Escalation in the region could potentially trigger a widespread flight to safety in the market and overshadow the optimism spurred by the positive China data.