Ahead of the full schedule of Chinese economic data set for today, traders continued to take the Yuan higher towards the post revaluation record in the overnight session. With notable interest in overall economic growth, market investors are betting that government officials will likely set another round of tightening in motion as the economy continues to gain at an accelerated pace. The 11 percent GDP estimate is being coupled with retail sales estimates to the tune of 16 percent and consumer prices that are expected to jump as high as 3.6 percent on the year. The USD/CNY was lower in the overnight session, trading at 7.5640.



Europe’s Trade Balance Widens With China
Surprising officials, it was revealed today that Europe’s trade gap with China widened in the first four months of the year by as much as 29 percent to 35.2 billion euros from 27.2 billion in the year earlier comparison. In detail, imports from China grew by 23 percent in the period as exports to China rose by less, rising only 12 percent. Bearish for the Euro, the findings will further fuel recent pleas by French President Sarkozy of global trade partners to allow their currencies to weaken, helping to take speculative pressure off of the Euro as an appreciated single currency has dampened the competitiveness of Europe’s exports. “The problem isn’t the value of the Euro, but the value of other currencies…France wants to put an end to monetary dumping which leads some currencies in the world to be managed in ways that have nothing to do with the market,” Sarkozy noted in a meeting with German Chancellor Merkel earlier this week. Incidentally, Chancellor Merkel has recently come round backing the notion and stating that the G8 nations “must keep an eye” on current yuan exchange rates. Nonetheless, traders threw comments and political sentiment to the wayside, bidding the EUR/CNY higher to 10.4443 in the overnight session.

US, China Officials Meet Earlier Than Expected
Following a raft of complaints from both sides on certain imported products, Chinese and US officials are set to meet this month in Beijing in order to rectify what has become an escalated back and forth battle between the two countries. In attempts to repair the slightly tainted $343 billion trade relationship, US officials will travel to the country’s capital, a month earlier than had been speculated. Built on recent statements by some US officials, the market was anticipating a meeting of the two sides to take place in two to three months. Instead, now the quickness of the response seems to be a suggestion that relations may not be as amicable as had previously been noted. Incidentally, the announcement comes ahead of a decision that is likely to be approved today by the House Appropriations Committee. In response to the recent trade restrictions on US meat products, policy makers are looking to approve a bill that would require food companies to list out the countries of origin for both meat and produce products.

Regional Markets Pummeled, Shanghai Rises
Bucking feel good vibes from Shanghai share gains, stock markets in both Singapore and Hong Kong were led lower in the session. Hong Kong’s Hang Seng index fell from the above 23,000 close as speculation surrounded further tightening by China’s central bank in order to curb investment and spending in the economy. Ultimately, the benchmark ended the day, losing 215.38 to close at 22,841.92. Singapore’s Straits Times index slipped 67.08 points to 3,583.07 at the close, 1.8 percent down on the day, following a report by the government that taxes would be raised on new developments. Increased to 70 percent from 50 percent the increase in tax would affect builders looking to tear down existing properties, hoping to rebuild the site and offer higher prices. As a result, lenders and builders led decliners with bellwethers CapitaLand and DBS leading the pack.

Richard Lee is a Currency Strategist at FXCM.