More settles under 1.0800

Midday Update

A raft of China data releases dominates trading on a very quiet Bank holiday Easter Monday, alongside risk-off trading sentiment due to the worsening Ukraine war and rising COVID cases in China.

Shanghai reported a record number of symptomatic Covid-19 cases on Saturday and other areas across China tightened controls as the country kept up its “dynamic clearance” approach that aims to stamp out the highly transmissible Omicron variant.

The Zhengzhou airport economic zone, a central Chinese manufacturing area that includes Apple supplier Foxconn, announced a 14-day lockdown on Friday “to be adjusted according to the epidemic situation.

Today’s top data release, China GDP from the first-fiscal quarter surprised to the upside. China Q1 2022 GDP beat estimates at 4.8% year-on-year, against 4.4%. Quarterly GDP also came in better with a 1.3% print, against 1.3% expectations.

Industrial production beat expectations, while Retail Sales came in worse than the market expected. Retails Sales showed that lockdown was hitting already, with a -1.6% print.

China’s National Bureau of Statistics acknowledged the difficulties facing the economy in the month: “We must be aware that with the domestic and international environment becoming increasingly complicated and uncertain, the economic development is facing significant difficulties and challenges”.

As you would expect with much of the western world away for Easter Holiday, the major market action is happening in Asian FX. The USDJPY pair briefly dropped earlier after the BOJ Governor commented about the central bank unease with the pace of the rising USDJPY pair.

The EURUSD pair is also being watched closely as it breaks under a huge multi-year trendline and starts to settle under the 1.0800 level amidst renewed strength from the US dollar index.

Gold has done very well this morning and has risen within touching distance of the $1,990 level, amidst rising concerns about slow growth and inflation, and of course the Russia crisis.

Bitcoin has also slipped on risk aversion and is now starting to settle below the $40,000 level despite a recent buying spree by Bitcoin bulls in March which sent the BTCUSD pair towards the $48,000 level.