USD/CNY falls as Chinese economy contracts by 6.8%; first decline in 25 years

The USD/CNY pair fell after the Chinese statistics office released weak first quarter economic data. The numbers were the first to shed light on the impact of coronavirus to the Chinese economy.

The data showed that the economy contracted by 9.8 per cent, which was the worst economic performance in recent memory. Economists polled by Dow Jones were expecting the economy to slide by 9.9 per cent. The economy slowed by 6.8 per cent on an annualized basis, which was worse than the expected 6.5 per cent.

This slowdown was driven by a reduction in business and personal activity in the country. Fixed asset investments, which are a significant contributor to the GDP dropped by 16.1 per cent in March. This was slightly better than February’s contraction of more than 24 per cent but worse than the expected decline of 15.1 per cent.

Meanwhile, industrial production declined by 1.1 per cent, which was also better than the February’s decline of 13.5 per cent. Economists polled by Dow Jones were expecting the production to have dropped by 7.3 per cent.

The retail sector, which employs millions of Chinese, also slowed down. The sector declined by more 15.8 per cent, which was better than the previous decline of 20.5 per cent but worse than the expected decline of 10 per cent. The sales have dropped by more than 10 per cent year-to-date.

Signs of stability

The data released today showed the negative impact the coronavirus pandemic has had on the Chinese economy. At the same time, they show that the economy is making some strides to come back from the crisis.

Recent information has been relatively positive. Earlier this month, data from China Logistics showed that the country’s manufacturing PMI rose to 53.5 in March. This was confirmed by another data by Caixin, which showed that the PMI was above 51.

Another data released by the customs office last week showed that imports and exports improved in March. The country exports declined by 6.6 per cent in March after declining by 17 per cent between January and February. Imports, on the other hand, declined by just 0.9 per cent after falling by 4 per cent in February. This led to a significant trade surplus.

Also, the data released today showed that the unemployment rate improved from 6.2 per cent to 5.9 per cent

Meanwhile, media reports have said that activity is improving in the country. A recent report by CNBC said that the auto sector had started to grow as more people rushed to buy private cars.

USD/CNY technical analysis

The USD/CNY pair fellslightly after China released the important economic data. The four-hour chart shows that pair formed a triple top pattern at 7.1242 between March 19 and April 2. The USD/CNY pair then moved lower to a low of 7.0237. The pair, which is trading at 7.0720 is inside the Ichimoku cloud and along the 23.6 per cent Fibonacci Retracement line. The pair may move to the lower side of the Ichimoku cloud at 7.0478.