Asia week ahead: Key data on China, Taiwan, India, Japan, Korea
The desk anticipates significant volatility in the FX markets as the focus shifts to key economic data releases from Asia, particularly from China and India. Per the full note , strong trade figures coupled with rising inflation in China may influence market sentiment, while India's CPI figures could present both opportunities and risks depending on their deviation from expectations. With China expected to report export growth of 24.1% year-on-year and India's CPI expected to rise to 4.7% YoY, these data points could catalyze movement in regional currencies. As no high-impact events are on the calendar in the coming month, traders should closely monitor the implications of these releases on positioning.
What the desk is arguing
The desk expects that upcoming economic reports from key Asian economies will be pivotal for FX traders focusing on the region. Specifically, China's trade surplus is projected to shift to $107 billion, alongside anticipated inflationary pressures, which should provoke reactions in the CNY and broader markets. Inflation in India is also set to rise due to commodity price pressures, especially in food and fuel sectors, further influencing currency dynamics in the region.
Trade in China has seen substantial strength, illustrated by the high export growth of 24.1% year-on-year, while a more moderate increase in Taiwan's inflation could prompt discussions about potential rate hikes. The delicate balance between trade growth and inflation in these economies will likely lead to varying responses in their currencies, particularly the CNY and INR.
Where it sits in our coverage
Current market consensus for USD/CNY is set at 1.075, with forecasts showing a range spanning from 1.04 to 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's outlook aligns closely with jpmorgan, indicating potential upward pressure, while diverging from bofa's more cautious stance, which sits at the lower bound of the forecast spectrum.
How other firms see it
There is a consensus among firms like jpmorgan and dbs that China’s economic strength will support the CNY amidst rising inflation, suggesting an aligned bullish perspective. Conversely, bofa presents a more bearish outlook given their lower target.
Watch USD/INR as the trajectory of India's CPI figures will significantly affect market positioning and could lead to adjustments in sentiment across the broader Asian FX landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01China's trade data expected to show strong export growth of 24.1% YoY, influencing FX dynamics.
- 02India's CPI anticipated to rise to 4.7% YoY, driven by food and fuel price pressures, impacting INR.
- 03Key focus on the balance of trade strength versus inflationary pressures across the region's economies.
- 04Market volatility anticipated as traders react to upcoming data releases.
Market implications
Traders should watch for reactions around USD/CNY when Chinese trade figures are released, particularly if they deviate from the expected $107 billion surplus. Similarly, fluctuations in USD/INR post-CPI release will be critical, given the implications for RBI monetary policy.
Risks to this view
A significant drop in exports or an unexpectedly sharp rise in inflation in either China or India could invalidate the current bullish stance on their currencies. Additionally, geopolitical tensions or domestic political instability could lead to adverse reactions in FX positioning.
Articles Asia week ahead: Key data on China, Taiwan, India, Japan, Korea Published 04:56 Asia week ahead China India Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Markets will focus on trade and inflation data from China and Taiwan, India's CPI, Japan's GDP and PPI, and South Korea’s revised GDP Deepali Bhargava and Lynn Song Asia Research highlights of the week China’s PMIs remained in contractionary territory in August China’s recovery stalls as K-shaped divergence widens Asia: AI-led growth drives the region’s outperformance China: Strong trade growth and higher inflation China releases trade and inflation data. Trade has been very strong year-to-date, and we expect this to continue into August. We’re looking for export growth of 24.1% year-on-year and import growth of 32.4%, bringing the August trade surplus to $107.0bn.
We’re also expecting CPI inflation to rebound moderately in August, rising to 0.9% YoY from 0.5% in July, with fuel prices likely to rebound. Taiwan: Trade strength, even as inflation moderates Taiwan releases trade and inflation data. We expect prices to moderate slightly but remain above target at 2.3% YoY.
Additional upside surprises could dial up pressure on the central bank to hike later this month. Market participants are split on whether the local elections will prohibit a rate hike. But historical cycles suggest this shouldn’t be a major factor.
Continued strong export orders suggest solid trade growth continued in August, with exports up 32.7% YoY and imports up 33.5%, for a trade surplus of $21.9bn. India: Inflation set to rise on food and fuel pressures We expect CPI inflation to increase to 4.7% YoY. The pickup will be driven by food price pressures from weak monsoons, visible especially in sugar and rice prices, and the spillover of higher fuel prices into core inflation.
Japan: Revised Q2 GDP, current account and PPI Japan releases revised Q2 GDP and July current account data on Tuesday. Market consensus expects GDP growth to be revised up to 0.4% quarter-on-quarter, equivalent to 1.8% annualised, from the previous 0.3% QoQ and 1.1% annualised, respectively. The market expects Japan’s current account to rebound to a surplus of JPY 285bn in July, following a JPY 92.3bn deficit in June.
The trade balance is expected to remain in deficit at JPY 268.4bn. Income from Japan’s overseas investments should continue to support the overall current account balance. Japan will release its August PPI on Friday.
The market expects it to accelerate to 7.4% YoY, from 7.2% in July. The pickup would suggest that upstream price pressures remain elevated, potentially sustaining the pass-through of higher input costs to consumer prices. Korea: Revised Q2 GDP to confirm robust growth South Korea will release its revised Q2 GDP data on Tuesday.
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