13 May 2014
Asia EM Express: India awaits election result, Chinese data confirms slowdown
FXStreet (Łódź) - After six weeks of voting the Indian national election has come to an end on Monday. According to exit polls the National Democratic Alliance (NDA) led by opposition Bharatiya Janata Party (BJP), is set to win, defeating the ruling Congress Party.
Chief Minister of the State of Gujarat and leader of BJP Narendra Modi and favorite for the post of Prime Minsiter has promised to boost development and employment in India to revive the stagnating economy.
“The market will now inevitably focus on the new course, provided the final count of votes confirms an absolute majority for the NDA,” Prashant Newnaha, Asia-Pacific Macro Strategist atTD Securities predicts. “Modi’s agenda is a reformist one, and one that markets have praised, but also largely anticipated.”
“While we believe a resounding NDA victory with the coalition contained to its original narrow configuration is a big positive for India and, thus, INR, the market may not be willing to extend the rally immediately, as suggested by moves in the NDF market. Long-term, however, we remain positive on INR and IGBs.”
The final result of the election will be announced on May 16.
Economic data
On Monday and on Wednesday a slew of Chinese data was released. New Loans, published by the PBoC decreased to ¥774.7B in April from ¥1,050.0B in March and below expectations of ¥840B. M2 Money Supply grew 13.2% on an annual basis in April, up from +12.1% recorded the previous month.
“The pace of loan growth slowed from a year earlier, but the stock of new debt is still growing faster than GDP, and it is difficult to say loan growth is slowing, since year ago levels were also high in the first four months of the year.” Greg Gibbs, FX Trading Strategist at RBS remarks. “As such it is hard to conclude that the government's actions to control excessive lending in some sectors of the shadow banking system have had a significant dampening effect on credit growth.
China's annual Industrial Production rose 8.7% in April, slightly down from 8.8% in March and below consensus of +8.9%. Retail Sales growth slowed to 11.9% from 12.2%, against forecasts of staying at the same level. Urban Investment (YTD) increased 17.3%, following a 17.6% rise and against expectations of climbing to 17.7%.
Following these releases Zhiwei Zhang from Nomura pointed out that the slowdown in activity continues to increase “pressure for more policy easing.”
“We expect activity indicators to continue to weaken in May and the government to loosen
monetary policy in Q2 by cutting the reserve requirement ratio by 50bp,” he added.
India informed on Monday that annual CPI hit a three-month high of 8.59% in April, up from +8.31 and above projections of a 8.48% rise. Sonal Varma and Aman Mohunta from Nomura believe that it should “average 8.2% y-o-y in FY15 versus 9.5% in FY14, but the trajectory is likely to be bumpy.”
Indian Industrial Production declined 0.5% in March, following a 1.9% drop and beating expectations of -1.5%. Manufacturing Output slid 1.2%, after decreasing 3.7%.
Technicals
The Indian rupee strengthened on Monday on hopes of Narendra Modi's victory in the presidential election, reversing the gains however later on “what many market participants believe is ongoing intervention by the RBI to restrain the INR and build up a buffer in their reserves,” as Greg Gibbs from RBS pointed out.
On Monday the USD/INR daily FXStreet Trend Index was slightly bearish, with the OB/OS Index neutral. RSI was at 42 at the last close, and has climbed to 46 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 3342 pips, with ATR (14) expanding at 3747 pips. The 1D 200 SMA was at 61.9667, while the 1D 20 EMA was at 60.2799.
The disappointing Chinese data, pointing a a economic slowdown in the country caused the yuan to weaken on Tuesday by 0.05% to 6.2407 per dollar.
On Monday the USD/CNY daily FXStreet Trend Index was slightly bearish, with the OB/OS Index neutral. RSI was at 55 at the last close, and has slid to 35 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 141 pips, with ATR (14) expanding at 107 pips. The 1D 200 SMA was at 6.1208, while the 1D 20 EMA was at 6.2343.
Chief Minister of the State of Gujarat and leader of BJP Narendra Modi and favorite for the post of Prime Minsiter has promised to boost development and employment in India to revive the stagnating economy.
“The market will now inevitably focus on the new course, provided the final count of votes confirms an absolute majority for the NDA,” Prashant Newnaha, Asia-Pacific Macro Strategist atTD Securities predicts. “Modi’s agenda is a reformist one, and one that markets have praised, but also largely anticipated.”
“While we believe a resounding NDA victory with the coalition contained to its original narrow configuration is a big positive for India and, thus, INR, the market may not be willing to extend the rally immediately, as suggested by moves in the NDF market. Long-term, however, we remain positive on INR and IGBs.”
The final result of the election will be announced on May 16.
Economic data
On Monday and on Wednesday a slew of Chinese data was released. New Loans, published by the PBoC decreased to ¥774.7B in April from ¥1,050.0B in March and below expectations of ¥840B. M2 Money Supply grew 13.2% on an annual basis in April, up from +12.1% recorded the previous month.
“The pace of loan growth slowed from a year earlier, but the stock of new debt is still growing faster than GDP, and it is difficult to say loan growth is slowing, since year ago levels were also high in the first four months of the year.” Greg Gibbs, FX Trading Strategist at RBS remarks. “As such it is hard to conclude that the government's actions to control excessive lending in some sectors of the shadow banking system have had a significant dampening effect on credit growth.
China's annual Industrial Production rose 8.7% in April, slightly down from 8.8% in March and below consensus of +8.9%. Retail Sales growth slowed to 11.9% from 12.2%, against forecasts of staying at the same level. Urban Investment (YTD) increased 17.3%, following a 17.6% rise and against expectations of climbing to 17.7%.
Following these releases Zhiwei Zhang from Nomura pointed out that the slowdown in activity continues to increase “pressure for more policy easing.”
“We expect activity indicators to continue to weaken in May and the government to loosen
monetary policy in Q2 by cutting the reserve requirement ratio by 50bp,” he added.
India informed on Monday that annual CPI hit a three-month high of 8.59% in April, up from +8.31 and above projections of a 8.48% rise. Sonal Varma and Aman Mohunta from Nomura believe that it should “average 8.2% y-o-y in FY15 versus 9.5% in FY14, but the trajectory is likely to be bumpy.”
Indian Industrial Production declined 0.5% in March, following a 1.9% drop and beating expectations of -1.5%. Manufacturing Output slid 1.2%, after decreasing 3.7%.
Technicals
The Indian rupee strengthened on Monday on hopes of Narendra Modi's victory in the presidential election, reversing the gains however later on “what many market participants believe is ongoing intervention by the RBI to restrain the INR and build up a buffer in their reserves,” as Greg Gibbs from RBS pointed out.
On Monday the USD/INR daily FXStreet Trend Index was slightly bearish, with the OB/OS Index neutral. RSI was at 42 at the last close, and has climbed to 46 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 3342 pips, with ATR (14) expanding at 3747 pips. The 1D 200 SMA was at 61.9667, while the 1D 20 EMA was at 60.2799.
The disappointing Chinese data, pointing a a economic slowdown in the country caused the yuan to weaken on Tuesday by 0.05% to 6.2407 per dollar.
On Monday the USD/CNY daily FXStreet Trend Index was slightly bearish, with the OB/OS Index neutral. RSI was at 55 at the last close, and has slid to 35 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 141 pips, with ATR (14) expanding at 107 pips. The 1D 200 SMA was at 6.1208, while the 1D 20 EMA was at 6.2343.