Chinese Economic Growth Accelerated - 18.1.2013

Chinese GDP increased more than expected in the fourth quarter of last year. The real rate of increase in the index showed 7.9% in annual terms (previously: 7.4%), while the industrial production and retail sales indicators for December also exceeded market forecasts - the increase was 10.3% and 15.2% respectively. As a result, all major Asian stock indexes showed strong growth during on Friday morning trading session, while the leaders were the Tokyo Nikkei 225 that added 2.86% on continuing weakening of the Japanese yen. US dollar against the yen finally reached 90.00. This morning the currency pair rose to the highest level since June 23 - 90.19, amid expectations that the Bank of Japan may take steps to more intense stimulus. Also yesterday, the Prime Minister - Shinzo Abe said that the downfall of national currency down to 95-100 yen per dollar is not a cause for concerns. This statement reassured market participants concerned about earlier statements from the Economy minister that excessive currency depreciation can have negative consequences for the country. The EURJPY currency pair also showed significant growth, breaking through the level of 120.00 and now it is reaching 20-months high at 120.70. It is also worthy to note strengthening of the US dollar against all major currencies except euro, which, largely supported with the data from the U.S. labor and housing market. Initial jobless claims fell in the previous week to 335000 that was far better than expected. At the same time, housing starts rose in December by 12.1% within a month, against an expected 3.3% growth. The strong statistics is becoming a supporting factor for the world main reserve currency, increasing the chances of quantitative stimulus reduction from the Fed. Due to this, the US dollar vs. Swiss franc today reached a 8-week high at 0.9388, and the British pound vs. US dollar fell yesterday to a 8-week low at 1.5954. It seems like the week ends with a positive note reflected in the growth in the stock and commodity markets. As for currency market, the decline in the Japanese yen and the growth of the euro are important. However, we note little dynamical change in the US dollar vs. the British pound, Swiss franc, Canadian dollar and Australian dollar. Improvement in the macroeconomic data, as we can see, begins to act in favor of the dollar, and this trend is likely to continue in the upcoming months.