Global macro overview for 17/07/2017

Global macro overview for 17/07/2017:

Good news came from China as the economy expanded faster than anticipated. The National Bureau of Statistics revealed, that the second quarter Chinese GDP grew by 1.7%q/q, up from 1.3% printed a quarter earlier. The world's biggest emerging market's growth improved to 6.9% on a yearly basis. The retail sales rose by 11.0% year-on-year in June, the industrial production unexpectedly expanded by 7.6%y/y in the same month from 6.5% a month earlier.

Over the past four quarters, the Chinese economy has relied on government spending and access to cheap credit provided by the Bank of China in order to fuel a faster than expected economic expansion. At the same time, efforts to stop a red hot housing market did not bring any substantial results, because of the strong demand. Buyers anticipating further restrictions on housing have flooded the market after authorities introduced limits back in March. Nevertheless, the NBS expects property investment growth to stabilize over the time.

In the other note from SBS, we can read, that: "Prudent and neutral monetary policy will provide necessary liquidity in the economy, but also prevent a rise in debt levels". The economy continues steady, improving momentum in the first half of 2017 and the economic growth lays a solid foundation for achieving the full-year GDP target despite international uncertainties and domestic structural problems.

Let's now take a look at the AUD/USD technical picture on the daily time frame. The Australian Dollar is strongly connected to the Chinese economy, as most of the commodities are being exported from there. The AUD/USD pair soared to 0.7836, the highest level in more than a year as carry traders are in charge of the market. The daily relative strength index is entering the overbought territory, indicating that a short-term correction could be underway. Yet, the downside potential appears to be limited.

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