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As the analogy goes…..If the United States coughs…We in Australia catch a cold. So, what happens if China gets a cough…or worse the flu? You would think we in “The Lucky Country” are toast! How many countries would be infected? A Plague perhaps?

China represents a massive 26 % of our Trade Weighted Index, whereas the United States is at 11 %.

Any decline in this number would be detrimental to our economic health. You can see the importance of China firing a shot across our bough recently suggesting siding with the U.S. would not be such a good idea.

The dilemma we have is on multiple fronts, what if, or what happens to Australia, if China’s growth comes to a standstill? Economically, China is looking vulnerable at the moment.

Here are some of the concerning headlines of late:

  • Chinese capital controls bite
  • China slams brakes on outgoing investment.
  • China tightens capital account again.
  • What would a U.S-China Trade war look like?
  • China property correction imminent.
  • Shrinkflation comes to China
  • China is wrestling with a building financial crisis.

At home, here in the land of milk and honey, a GDP print of -0.5 was less than acceptable. Another negative print in the March release and we are officially in a recession.

I don’t even want to think about what is on the horizon for interest rates and the Housing Market bubble.

As in Europe, we are in for an interesting 2017. So, buckle up folks we are approaching some turbulence.

The good news is Trading FX is recession proof.

Adrian Jones