On Monday, the main currency pair is falling under pressure from the not very fresh Chinese news.
At the beginning of the week in the macroeconomic calendar has experienced an information vacuum, but investors did not panic, and took advantage of the Chinese statistical data from last weekend. The euro/dollar declines on Monday afternoon, and the current price is 1.0885 (-0.35%).
So, the world really is watching carefully what is happening in China. Inflation in December in China rose by 0.5% m/m (+ 1.6% y/y) against the forecast of 0.4% m/m and 1.5% y/y. At first glance, these numbers are not bad, but this is misleading. The problem is that the target of the PBOC in 2015 for the Consumer Price Index was at a level of not less than 3%. It turns out that the total indicator of prices in the consumer basket looks quite weak. This, in turn, indicates the small consumer activity and minimal internal demand.
The risk lies on the surface. If China's inflation will remain so small - to the scale of the local economy – it could quickly become a catalyst that would lead the global GDP down. This is important, in fact, although it now seems that only the destabilizing effect of inflation is not enough. But this is not so - the lack of support from inflation against the backdrop of a comprehensive demand stimulation could be a failure for the Chinese economy. Or, it may not be: if export suddenly activates, everything will work out by itself. But the chances of this miracle are not very high.
The euro/dollar is now taking everything into account of its price - from the darkest general market sentiment to Asian risks. In this light, the position of the US dollar looks more stable.
RoboForex Analytical Department
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