By Chris Tedder, Research Analyst FOREX.com

The much anticipated Chinese GDP data printed just below consensus at 7.6% y/y. However, it appears that the market rumours and/or fears of a much lower figure caused investors to price in a certain amount of disappointment, which was reflected by a rebound in risk currencies following the announcement. Also, the data that printed alongside the GDP figures provides an insight into future economic data out of China, and it's not that bad. In fact, fixed asset investment increased 20.4%, significantly higher than economists were expecting and, importantly, this asset investment should help stimulate growth in coming quarters.

Nonetheless, there are numerous headlines focusing on the fact that GDP growth is at its slowest level since early 2009. Whilst this is true, it almost irrelevant, especially considering that this was Beijing's goal all along, albeit a less severe slide was likely the original aim of the policy tightening measures. Instead, we are looking at how the Chinese government can stimulate growth. The most recent direct attempt to boost domestic demand was another cut to interest rates, but this is just a small part of Beijing massive stimulus arsenal. Perhaps the most effective tool is infrastructure spending, the likes of which we saw during the financial crisis. Whilst we don't expect to see the same amount of stimulus as a few years ago, government officials have hinted to more public spending down the track, which should help promote growth.

Overall, recent economic data, especially new bank lending figures, suggest we may see the growth slowdown turnaround this quarter, albeit only slightly. This should reinforce the belief that Beijing has both the will and capacity to prevent a hard landing in China, despite the turbulence coming from Europe. In fact, we already think this is the case, and think it will bode well for risk assets in long-term but possibly not in the near-term as investors remain focused on the possibly on a euro breakup.

The aussie, kiwi and euro all pushed higher against the dollar on the back of the Chinese data, with AUDUSD finding some resistance around 1.0177 after punching through 1.0150 and EURUSD not initially rising after the release but feeding off the positive risk sentiment later in the session, eventually pushing through 1.2210. Equities also rallied following the release, albeit not by much. The ASX200 is currently in the green by around 0.58% after starting the morning fairly flat.

Elsewhere, industrial production in Japan decreased 3.4% m/m. However, as usual the yen was too tied ?up in overall risk sentiment to react significantly to domestic data.

Tonight, the market will be focusing on Italy's 10-yr bond auction and producer prices data out of the US. Also, early in the session Moody's cut Italy's debt two notches to Baa2 with a negative outlook, so it will be interesting to see if this affects tonight's bond auction.