Chinese activity data for 4Q22 was much better than expected and supports the proposition that the 2023 Chinese growth story will support pro-cyclical currencies, economists at ING report.

China data supports 2023 FX trends

“FX markets have had a quiet start to the week – perhaps awaiting edicts from Mount Davos? However, Chinese data released overnight was material and very much supports this year's hottest trend that China's zero-Covid reversal will spark resurgent Chinese demand.”

“The Chinese data did not, however, trigger any follow-through buying of the Renminbi or Asian currencies in general. Rather than concluding that this story has already run its course in FX markets, we would prefer to see price action as merely quiet before the Chinese New Year starting next week, and the big event risk in early Asia tomorrow, which is the Bank of Japan (BoJ) meeting.”