The USD/CNY exchange rate rose for the fourth consecutive day, reaching a high of 7.28, after the relatively weak Chinese economic data. The remninbi has dropped by almost 4% from its highest level this year.

China’s economy is not doing well

The USD/CNY pair continued rising afer China published a weak economic report that showed the economy was not doing well.

According to the country’s statistics agency, retail sales rose by 3.0% in November, missing the median estimate of 4.6%. It was also much lower than the previous increase of 4.8%.

Retail sales are an important part of the economy because of the crucial role that consumer spending plays. It has remained under pressure in the past few years as the housing market collapsed. 

The industrial production figure came in at 5.4%, slightly higher than the previous 5.3%. Also, fixed asset investments slowed to 5.3%, missing the expected growth of 3.5%.

The housing market is also not doing too well as prices continued falling. New home sales dropped 0.2% from October, the third consecutive month of improving slowdown. These numbers offered a glimmer of hope that the sector was starting to stabilize.

Beijing has taken measures to boost the housing market that has collapsed in the past few three years. Just recently, the government slashed taxes for home purchases, while the Peoples Bank of China (PBoC) slashed mortgage rates.

These numbers mean that the second-biggest economy is still not doing well and that it will struggle to hit the 5% target set by Beijing. Most notable Wall Street banks like Bank of America, Goldman Sachs, and Morgan Stanley have all lowered their GDP estimates this year.

There is also a big risk as the Donald Trump administration comes in. Trump has pledged to be tough on China and has appointed people critical to the government in senior positions. Marco Rubio, one of the top China hawks, has been appointed to be the State Secretary.

Trump has also hinted that he will restart his trade war, a move that may affect Beijing in the longer term. He has promised to implement large tariffs on Chinese imports.

The next key catalyst for the USD/CNY pair will be the PBoC and Federal Reserve interest rate decisions. The PBoC is expected to leave the prime interest rate unchanged at 3.10% and the five-year one at 3.60%.

Economists expect that the Federal Reserve will also slash interest rates by 0.25% this week as woes in the labor market continue.

USD/CNY technical analysis

USD/CNY chart by TradingView

The daily chart shows that the USD/CNY exchange rate has been in a slow uptrend in the past few weeks. It has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. This is one of the most bullish patterns in the market.

The pair has also moved to the key resistance point at 7.2758, which was its highest point in July last year. Therefore, a move above that level will point to more gains, with the next point to watch being at 7.3478, its highest swing in 2023. 

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The GBP/USD exchange rate continued its strong sell-off after last Friday’s UK GDP data and as traders waited for the upcoming Federal Reserve and Bank of England decisions. The pair retreated to a low of 1.2630 on Monday, down from the month-to-date high of 1.2810.

UK economic slowdown

There are signs that the UK economy is not doing well. Data released on Friday showed that the economy contracted by 0.1% in October after contracting by 0.1% in the previous month. It was a weaker slowdown than the median estimate of 0.1%.

This slowdown translated to a year-on-year growth of 1.3%, also lower than the median estimate of 1.6%. 

More data showed that the country’s trade deficit widened to over £18 billion in October from £16.32 billion a month earlier. The deficit was also higher than the median estimate of £16 billion.

Another report showed that the UK manufacturing production dropped by 0.6% in October, a smaller drop from the previous minus 1.0%.

Industrial production dropped by 0.7% during the month, while construction output slipped by 0.7% on a YoY basis.

These numbers mean that the economy was still struggling, a trend that may continue in the comig months.

Looking ahead, the Office of National Statistics (ONS) will publish the latest jobs numbers on Tuesday. Economists expect the data to show that the unemployment rate rose from 4.3% in September to 4.6% in October. The average earnings ex bonus is expected to come in at 5.0%. With bonuses, the index is expected to come in from 4.3% to 4.7%.

These numbers will come a day before the ONS publishes the latest consumer price index (CPI) data. Economists polled by Reuters expect the data to show that the headline CPI rose from 2.3% to 2.6%. 

Core inflation, which excludes the volatile food and energy prices, is expected to move from 3.3% to 3.6%, a sign that inflation was moving in the wrong direction. It had dropped to below 2% a few months ago.

Therefore, the Bank of England will be in a dilemma on Thursday since the UK has moved into a stagflation period. Stagflation is a situation where the economy is slowing at a time when inflation is rising.

It is a big dilemma becaus a rate cut may stimulate the economy but also lead to higher inflation over time. 

Federal Reserve decision ahead

The GBP/USD exchange rate will also react to Wednesday’s Federal Reseve decision. Economists expect that the Fed will slash rates by 0.25%, bringing the year-to-date cuts to 1%.

The Fed is mostly concerned about the labor market at the expense of inflation. Data released this month showed that the unemployment rate rose from 4.1% to 4.2% even as the economy added over 200k jobs. These job additions were mostly because the hurricanes and the Boeing strikes ended.

Like the Bank of England, the Fed is struggling to deal with the stubbornly high inflation rate. Recent data showed that the headline CPI rose to 2.7%, while the core CPI remained unchanged at 3.3%.

Therefore, analysts expect a dovish tilt from the Fed as it cuts rates and points to more cuts in the coming months.

GBP/USD technical analysis

GBP/USD chart by TradingView

The daily chart shows that the GBP/USD exchange rate has dropped to 1.2600, its lowest point since November 7. This decline happened after the pair formed a rising wedge pattern, a popular bearish sign.

The GBP to USD pair has formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages crossed each other. Therefore, the pair will likely continue falling as sellers target the key support at 1.2500.

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Indian benchmark indices started the week on a weak note, with the BSE Sensex falling 0.32% to 81,872.77 and the Nifty 50 dropping 0.29% to 24,696.40 as of 10:20 am.

Banking, financial, and IT stocks led the declines, reflecting investors’ caution ahead of the US Federal Reserve’s upcoming policy meeting.

The market is closely monitoring the Fed, with CME FedWatch assigning a 93% probability of a 25-basis-point rate cut.

Historically, lower US interest rates support emerging markets like India by attracting foreign institutional investor (FII) inflows.

However, Indian IT stocks, heavily reliant on US revenue, slipped by up to 1%, reflecting concerns over slowing global demand.

Major laggards on the Sensex included HDFC Bank, Infosys, TCS, Kotak Mahindra Bank, and Axis Bank.

In contrast, Reliance Industries, Tata Steel, L&T, ITC, and UltraTech Cement recorded modest gains.

Shares of Afcons Infrastructure, a Shapoorji Pallonji Group subsidiary, jumped 8% in early trade today to hit a new 52-week high of ₹564.40 on the BSE.

The rally came after the company secured a Letter of Acceptance (LOA) from the Madhya Pradesh Metro Rail Corporation for the ₹1,007 crore Bhopal Metro Phase 1 project.

Dixon surges over 4.6% on JV with Vivo India

Dixon Technologies emerged as a standout performer, surging over 4.6% to reach a record high of ₹18,790.

The rally followed the announcement of a joint venture with Vivo India, where Dixon will hold a 51% stake.

The venture will manufacture smartphones and other electronic devices for Vivo and potentially other brands, boosting Dixon’s role in the OEM space.

The joint venture between the two companies comes when major Chinese smartphone firms in India are under heightened scrutiny over allegations including customs duty evasion, income tax violations, and money laundering.

Sky Gold hits the 5% upper circuit

Sky Gold also caught attention, hitting a 5% upper circuit at ₹465.70 as its shares traded ex-bonus on Monday.

The 9:1 bonus issue means shareholders will receive nine new equity shares for every share held, with December 16 set as the record date.

Sky Gold’s share price has delivered exceptional returns to investors, gaining over 42% in the past month and nearly 250% in the last six months.

Analysts’ take: ‘support lies at 24,600’

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted persistent challenges for Indian markets despite positive FII flows in December.

“While FIIs turning buyers in December, after the relentless selling in the previous two months, is positive, investors should not assume that FIIs will continue to buy. A strong dollar and high bond yields in the US are headwinds for capital flows,” he said, adding,

The slowdown in GDP growth and stagnant earnings growth are hurdles for the bulls.

A rally will be sustained only if growth and earnings data show recovery. This will take some time.

Hardik Matalia, Derivatives Analyst at Choice Broking, identified key technical levels for the Nifty, noting, “Support lies at 24,600, with further downside at 24,500 and 24,400. Resistance is pegged at 24,850, followed by 24,950 and 25,050.”

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Asia-Pacific markets slipped on Monday, reversing earlier gains as investors weighed key economic data from China and anticipated major central bank decisions, including those from the Bank of Japan (BOJ) and the People’s Bank of China (PBOC), later this week.

China’s economic data disappoints amid real estate struggles

China released a mixed batch of November economic data on Monday.

Retail sales grew by 3% year-over-year, falling short of the 4.6% expected, signaling weakening consumer demand.

Industrial production rose 5.4%, slightly surpassing forecasts, but the real estate sector continued to contract, with investment shrinking 10.4% from January to November compared to the same period last year.

The CSI 300 index, which tracks the largest stocks listed in mainland China, dropped 0.34%, while Hong Kong’s Hang Seng Index led regional losses, falling 0.7%.

Central bank decisions in focus

The BOJ is expected to maintain its policy rate when it meets on Thursday, while the PBOC will announce its one-year and five-year Loan Prime Rates (LPR) on Friday.

These rates are closely watched as they influence corporate and household loans, as well as mortgage rates, in China.

Investors are also looking ahead to the US Federal Reserve’s policy decision on December 18, with markets pricing in a 96% likelihood of a 25-basis-point rate cut, according to the CME FedWatch tool.

Market performance across Asia-Pacific

• South Korea: The Kospi hovered near the flatline, while the small-cap Kosdaq gained 0.87%. This followed political turmoil over the weekend, as South Korean President Yoon Suk Yeol was impeached. The country’s finance ministry stated it would monitor financial markets closely to address any volatility.
• Japan: The Nikkei 225 rose 0.16%, while the broader Topix edged slightly lower.
• Australia: The S&P/ASX 200 declined 0.31%, reflecting muted sentiment across the region.

Bitcoin hits a new all-time high

Bitcoin surged past the $105,000 mark on Monday, setting a record high of $106,509.

The cryptocurrency rally was buoyed by pro-crypto remarks from US President-elect Donald Trump, who expressed plans to make the US a leader in cryptocurrency.

Additionally, Texas announced plans to establish a “strategic bitcoin reserve,” further boosting investor confidence.

In the US, the Dow Jones Industrial Average fell for the seventh consecutive session on Friday, dropping 0.2%.

Meanwhile, the Nasdaq Composite gained 0.12%, and the S&P 500 closed virtually flat.

With central bank decisions and economic data dominating the headlines, Asia-Pacific markets are likely to remain volatile as traders brace for key developments later in the week.

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The US fraud case against Indian billionaire Gautam Adani has sparked significant legal debate, as prosecutors in Brooklyn aim to build a strong case using documents that may reveal extensive bribery activities.

However, while the case appears to have critical evidence backing it, experts believe the likelihood of Adani being extradited to stand trial in the United States remains slim due to complex international legal challenges.

Adani’s legal team has firmly denied the accusations, calling them “baseless,” and the case is expected to unfold over a lengthy period, with key legal hurdles yet to be addressed.

Indictment against Gautam Adani

In November, federal prosecutors in Brooklyn unsealed an indictment against Gautam Adani, his nephew Sagar Adani, and another Adani Group executive, accusing them of bribing Indian officials to encourage the purchase of electricity produced by Adani Green Energy, a subsidiary of the Adani Group conglomerate.

Additionally, the charges allege that the Adani Group misled US investors about its anti-corruption practices, providing false assurances while allegedly engaging in bribery.

The charges leveled against the Adani executives include securities fraud and conspiracy, with five individuals tied to Azure Power Global, a US-listed company, also facing charges for allegedly violating the US Foreign Corrupt Practices Act (FCPA).

Azure Power, in a statement, confirmed its cooperation with the investigation, claiming that the individuals charged were no longer with the company.

Despite these allegations, the Adani Group has vowed to vigorously pursue all legal avenues to contest the accusations, describing them as unfounded.

While Gautam Adani has not been taken into custody, the case has drawn significant attention in India.

He was publicly seen at least twice after the indictment, including attending a major event on December 9, alongside Indian Prime Minister Narendra Modi.

These appearances have fueled speculation regarding Adani’s status and the potential for legal proceedings, especially as his business empire faces increasing scrutiny.

‘Bribe notes’

The indictment outlines some key evidence that could strengthen the US prosecution’s case, including “bribe notes” found on Sagar Adani’s mobile phone.

Prosecutors also revealed that Gautam Adani emailed himself a copy of a search warrant and grand jury subpoena served to his nephew on March 17, 2023, marking these electronic records as potentially critical pieces of evidence.

Legal experts suggest these materials could play a significant role in demonstrating that both Adani and his nephew were aware of the misleading statements provided to investors, especially regarding the company’s anti-corruption efforts.

Stephen Reynolds, a former federal prosecutor, explained that such corroborating evidence strengthens the prosecution’s position.

“The allegations include references to corroborating material, and that always provides for a stronger case,” Reynolds told Reuters.

Significant legal challenge for prosecution

However, the defense is likely to argue that Gautam Adani had no direct involvement in the misleading statements about the company’s anti-bribery policies, which could provide a significant legal challenge for the prosecution.

In addition to this, securing live testimony from witnesses in India could prove difficult for US prosecutors.

Mark Cohen, a former federal prosecutor, highlighted the potential complications of obtaining witness testimony in India, especially if it could implicate local officials in corruption.

This could require diplomatic intervention from the Indian government, which has shown reluctance in the past to assist with cases that might reflect negatively on its officials.

India’s foreign ministry has already indicated that it has not received any formal extradition request from the US regarding Adani, describing the issue as a matter between private firms and the US Justice Department.

Despite these complications, the US prosecutors are pressing forward.

Drew Rolle, deputy chief of the business and securities fraud section at the Brooklyn US Attorney’s office, emphasized the importance of holding foreign companies accountable when they operate in US capital markets.

“It’s not only a bribery case, it’s an important securities enforcement case,” he stated at a conference on December 6.

Rolle noted that his office has successfully convicted foreign officials in similar cases, underscoring the US government’s commitment to protecting the integrity of its financial markets.

As the case develops, questions remain regarding the likelihood of Adani’s extradition. Legal experts agree that although the evidence against him may be compelling, political and diplomatic barriers could prevent the billionaire from facing trial in the US anytime soon.

For now, the Adani Group remains resolute in its defense, while US prosecutors continue to press their case, signaling that the legal battle could be prolonged and contentious.

With the legal and diplomatic hurdles ahead, the saga surrounding Gautam Adani’s alleged fraud and bribery charges is likely to continue drawing significant attention, not just in India, but also across global financial markets.

As this case unfolds, the broader implications for international corporate governance and the enforcement of foreign bribery laws will be closely watched.

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