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Overall this was the slowest pace of expansion in three years indicating a clear slowdown in growth in world's second biggest economy. However, China Daily reported that officials expect growth to rebound to 8% in Q3 and 8.3% in Q4 reaching the key 8% target by end of the year.
Investors now expect a soft landing for the Chinese economy with PBOC anticipated to lower rates 2 or 3 times before the end of the year in order to stimulate demand, yet with Europe - China's biggest export market - showing few signs of improvement the prospect of further contraction in Chinese rate of growth remains a very real possibility.
Boris Schlossberg
Managing Director of FX Strategy
Alcoa Inc., the largest U.S. aluminum producer, may report an 84 percent decline in second-quarter earnings as the eighth straight year of surplus global production drives down the price of the metal.
http://business.financialpost.com/2012/07/09/alcoa-earnings-expected-to-plunge/
There are 2 main reasons for the euro’s weakness and the first is risk aversion. Weak economic data and pessimistic comments from the central banks of Europe have made investors extremely nervous about the outlook for the global economy. For this reason, every piece of bad news, including today’s non-farm payrolls report has made investors more risk averse.
The second reason why the EUR/USD experienced such a large decline is because investors believe that the ECB will expand its balance sheet at a faster pace than the Federal Reserve. In plain English, this means that they expect the ECB to be more aggressive than the Fed in easing monetary policy.
http://www.bkassetmanagement.com/featured/what-drove-eurusd-to-a-fresh-2-year-low/
By Kathy Lien, Managing Director of FX Strategy for BK Asset Management
After sitting on the sidelines for the past few months, central banks around the world decided that it was finally time to spring into action. This morning, the Bank of England, People's of China and the European Central Bank eased monetary policy, triggering widespread volatility in the foreign exchange market. The European Central Bank's decision to cut its refinancing rate to to a record low of 0.75% stripped the EUR/USD of all its EU Summit gains even though ECB President Draghi refused to comment on the possibility of LTRO3. While the decision was largely anticipated, it was nonetheless significant enough to drive the EUR/USD sharply lower. In our ECB Preview, we wrote that a rate cut by the ECB could be a win-win for the EUR and this could still be true once the dust settles and investors realize that the ECB has finally stepped out of the shadows and taken steps to actively stimulate the Eurozone economy. However this may take a few days and will only happen if equity traders respond positively to the global easing. Interestingly enough, Dow futures are trading lower this morning, which could be a result of Draghi's extreme pessimism
