The Economic Surprise index
We are updating the surprise index for the major currencies and posting wach chart when ready, US and UK charts were published in the previous post, here we have Europe, China and Australia (explanation and surprise index methodology)
The surprise index for the Eurozone continued its trend lower for the whole of 2018, that is in contrast to most other countries that saw a change over the summer. The Index suggests that the Zone is heading towards a recession with monthly data points being consistently lower than previous months and forecasts.
Although we dont trade the Chinese currency we do track its Surprise index as it is so important to the global economy. There are question marks about how reliable and trustworthy this data is due to the extent of influence the chinese government has over its releases. As you can see from the chart the trend is clearly higher although we have seen a significant dip in November and December, we will watch this during the first quarter of 2019 to see if a new trend is developing or not.
Closely linked to the performance of China is that of Australia, the Aussie dollar moves to the chimes of the global economy and has been pretty beat up of late, the drop in the china data wil have something to do with that but we dont yet have a clear trend and as you can see from the Aussie Surprise index chart the Australian economy has had a pretty positive end to 2018 in fact since september it has been on a bit of a tear. The first half of 2018 was pretty flat (remember flat indicates on target growth). If this continues expect the AUD to reverse some of its recent losses and combining this with the Euro chart Short EURAUD would seem to be a trade with some justification