The trade surplus of China has expanded as exports indicate a growing demand environment.

• Key points Information from China's trade data indicated a positive shift in demand, showing less steep year-over-year declines in imports and exports.

• Despite a smaller year-over-year decrease in producer prices, both producer and consumer prices did not meet expectations.

• Ahead of the release of US Michigan Consumer Sentiment figures, the focus will be on the interest surrounding new Yuan loans from China.

China's Trade Surplus

Expands to $77.71 Billion China's trade surplus in US dollars grew to $77.71 billion in September, surpassing economists' forecast of $70.00 billion. Notably, year-over-year exports fell by 6.2%, a less severe decline compared to the 8.8% drop in August, while imports decreased by 6.2% year-over-year, compared to a 7.3% decrease in August. Economists had predicted declines of 7.6% for exports and 6.0% for imports. The less sharp decreases in imports and exports point to an increasingly positive macroeconomic environment, potentially indicating that the worst may be over for the Chinese economy with additional stimulus measures on the horizon.

However, the ongoing Middle East conflict poses a challenge for global financial markets, with potential impacts on supply chains, inflation, and demand.

Chinese Inflation Figures Fall Short of Expectations During the Friday session, investors also showed interest in China's inflation data. Consumer prices rose by 0.2% month-on-month in September, down from 0.3% in August, while remaining unchanged year-over-year. Economists had expected an annual inflation rate of 0.2% and a 0.3% increase in consumer prices for September.

Additionally, producer prices experienced a 2.5% decline year-over-year, less severe than the 3.0% decrease in August, although still below economists' predicted 2.4% decline. Despite failing to meet expectations, the milder reduction in producer prices could signal a potential uptick in demand; however, factory prices have now decreased for twelve consecutive months.

Impact on AUD/USD

Prior to the release of the trade data, the AUD/USD dropped to a pre-stat low of $0.63071 before rebounding to reach a high of $0.63344. Subsequently, in response to the trade figures, the AUD/USD increased to a post-stat high of $0.63299 before declining to a low of $0.63250. The AUD/USD saw a 0.19% rise to $0.63256 this morning.

Upcoming Events

The upcoming focus will be on the new loan figures from China and the US Michigan Consumer Sentiment Index. A rise in new Yuan loans would indicate an increase in economic activity, with economists forecasting an increase from CNY1,360 billion to CNY2,500 billion in September.

In the US session, economists anticipate the Michigan Consumer Sentiment Index to decrease from 68.1 to 67.2 in October. Following the unexpected surge in US CPI and a similar unexpected increase in consumer sentiment may push the Fed to consider interest rate hikes to address inflation.