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No RBA panic; China looks for growth within own walls
In this Asia Focus Video, Andrew Robinson, FX Analyst for Saxo Capital Markets in Singapore, analyses the latest data out of Australia in light of the no rate change yet environment. He also comments on the importance of the China National Party Congress this week and the impact of China’s revised growth target for 2012.
Australia’s economy grew less than half of what was expected in the final quarter of 2011. The slowing was mostly due to lower domestic demand with personal spending and household consumption all seeming to be on the weak side. Ultimately this comes hardly as a surprise though because Australia’s growth has for a long time been driven by exports from the strong mining and resource sectors. It is perhaps really more of an indication that market focus may be shifting towards poor domestic demand, says Andrew.
Australian employment data for February looked shocking on the headline numbers with three times as many jobs lost as gained. Closer analysis however confirmed a healthy reduction in the number of part-time jobs.
Despite these two seemingly negative reports it’s not likely the Reserve Bank of Australia ‘regrets’ its decision earlier in the week to leave rates unchanged. These reports in isolation are hardly enough to make the RBA panic, he says. There is no doubt though that there is a rate cutting mood evident in the market once more, with about 60 basis points of cuts priced in and around estimates of a 30 percent chance of a 25 basis point cut at the next RBA meeting. Andrew however believes the bank will stand pat on rate cuts for at least a few more months with more evidence of a strugling economy required.
In China this week there has been heavy focus on the China National Party Congress. The revised growth target for China to 7.5 percent is recognition that the external situation is deteriorating and there’s great risk that the export side of the economy will struggle going forward, says Andrew. But Chinese authorities really do want to try and create more domestic demand and the rest of the world is hoping it will succeed much faster in its attempts, he adds. Immediate results or a shift in policy in that respect are unviable. The markets however might just be a bit too pre-emptive about how quickly domestic demand in China can actually be revamped, concludes Andrew.
See more of Andrew's Asian market commentary on TradingFloor.com
05:36 minutes
Tags: andrew robinson, audusd, australia, china, employment, gdp, national, party, rates, rba, reutersforex, tradingfloor.com, unemployment