Forex Today: AUD retained the bid tone despite weak China data, focus on the UK parliament vote

Forex Today saw AUD remain resilient in the face of the dismal China data release and the USD/JPY regain the bid tone.

China second-quarter GDP growth slowed to 6.7 percent (lowest since Q3, 2016) from a year ago as expected, compared to 6.8 percent in the first quarter of 2018. Meanwhile, June industrial production came in at 6 percent year-on-year – the slowest growth rate in over two years, beating the estimated drop to 6.5 percent from the previous month’s print of 6.8 percent. Further, retail sales matched estimates of 9 percent.

Clearly, the world’s second-largest economy is feeling the heat of the crackdown on riskier lending and could face further damage if the trade war with the US escalates.  That said, the slowdown in the economy could make it easier for officials to justify shifting to a more supportive stance.

The Aussie dollar, a proxy for China, felt the pull of gravity after China data release, however, the downside was capped around 0.7410.

The USD/JPY pair printed session highs above 112.50, having scaled the key long-term falling trendline hurdle on Friday.

Key news in Asia

• China Q2 GDP hits expectations, Industrial Production slides
• ECB’s Weidmann gives warning of an economic slowdown – German Press
• China’s Premier Li: Important to uphold multilateralism, free trade
• China’s Stats Bureau: China’s consumption to remain steady in H2
• China cozying up to Europe amidst Trump tariffs
• Iraq urges the US to not engage in strategic reserve oil price manipulation

Key focus ahead

British Prime Minister Theresa May’s Brexit strategy will be put to vote in the parliament. The leading euro-skeptics are set to vote in favor of amendments that May opposes and back their own proposals to toughen up her exit plan, according to Reuters.

The GBP could take a beating if the majority of her party members vote in favor of altering the customs bill, undermining her negotiating strategy.  Focus will also be on David Davis – Britain’s former Brexit minister and former Foreign Minister Boris Johnson, who is gunning for May’s post. Both could speak in the debate, currently due to start at 1430 GMT, according to Reuters News.

Moving in the NA session, the US will report monthly retail sales, which are seen rising for a fifth consecutive month, albeit at a slower rate.

EUR/USD: Put demand rises despite Friday’s bull hammer reversal

The EUR created a bull hammer reversal pattern on Friday, still bulls are cautioned against being too ambitious as the risk reversals show the demand for put options (bearish bets) continues to rise.

GBP/USD making another run at 1.3250 ahead of a thin Monday

The UK parliament vote will reveal the extent of anger over May’s Brexit plan and could influence GBP pairs. Cable also created a bullish hammer on Friday and a positive follow-through today (close above 1.3238) would confirm a short-term bullish reversal.  

US: Retail sales and industrial production in focus this week – NBF

In the US, industrial production may have risen moderately in June, echoing a slight expansion of output in the manufacturing sector, according to analysts at National Bank Financial.