Bad Chinese data lifts US dollar, again
Recent Trade Balance statistics are the latest metrics to support the ongoing economic slowdown in China. Find out how US dollar and neighboring currencies like Japanese yen and Australian dollar were affected.
Key points
- Chinese Trade Balance for October was the lowest since February
- US stocks (QQQ) are outperforming Chinese stocks (FXI) by 50%
- USD traded higher against AUD and JPY following data
China's Trade Balance worsens
Monday night, China reported a Trade Balance of $56.53B for the month of October to mark its lowest balance since February. Looking further, exports YoY declined 6.4% - nearly double the expected 3.3% decline. While often a mid-tier data point for other countries, China's position as the world's leading exporter caused markets to react strongly to the Trade Balance report.
AUD/USD slid over 50 pips in the hours following the data release while USD/JPY rose almost 40 pips. Both Japanese yen and Australian dollar are historically positively correlated with China's economy given their geographic proximity and close trade relationships.
Zooming out, Chinese stocks (FXI) are down 10% year-to-date while US stocks (QQQ) are up 40% over the same time. US dollar has seen a rise both this week and throughout the year as Chinese stocks are generally negatively correlated with USD. Over a 3-month period there is a -0.3 correlation between the two (FXI/UUP).
How to trade US dollar
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD pairs
Trading forex requires an account with a forex provider like IG. USD pairs can be found in IG's platform under the 'USD Pairs' pairs tab. Many traders also watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like IG’s Trading Academy. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
Why are economic events important to forex traders?
Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times. Potentially influential events include inflation releases and interest rate decisions.
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