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OANDA – China GDP confirms slowdown, queue up the PBOC

July 16, 2019 Financial No Comments Email Email

China’s wrath of economic data shows the slowdown remains intact and markets should expect further stimulus from the PBOC later this summer. The trade war is having a huge impact on the Chinese economy, and with no end sight as trade negotiations struggle for meaningful progress, we are probably not near the bottom for China’s economy.  While the PBOC has already delivered stimulus this year, markets are awaiting a bazooka of RRR cuts and additional measures which will probably come if trade talks collapse.  If talks steadily progress, we will still probably see the PBOC deliver fresh stimulus following the Fed’s highly anticipated rate cut at the end of the month.

Industrial production and retail sales both had strong beats, but it could be a combination of factors of effects from stimulus that has been put in place and stronger domestic buying from a strong drop in tourism, that has locals spending domestically.

China growth fell to 6.2% from a year ago, the lowest levels in 27 years, but it is a controlled slowdown.  Markets should not should not get worried for Asia unless the PBOC lets GDP fall below 6.0%.  The PBOC will probably ease liquidity and deliver a wide range of RRR cuts in the second half of the year to help China’s economy.

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