Written by Raffi Boyadjian, Lead Investment Analyst at XM.com. An original version of this article can be found here.

China's economy grew by a less-than-expected 6.3% year-on-year in the second quarter of 2023, missing forecasts of 7.3% and raising concerns not only about a deepening slowdown, but also about the lack of a robust policy response by authorities.

On the whole, the data wasn’t terribly bad. GDP expanded somewhat more than expected on a quarterly basis and industrial production and fixed asset investment topped estimates in June.

But the fact that the economy was in a far weaker position in the year to June than previously anticipated and in the absence of substantial stimulus measures, there is a growing sense of frustration as well as anxiety about China’s dwindling economic prospects.

Stocks in Asia slipped on Monday on the back of the underwhelming data about the world’s second-largest economy.

European equities opened in the red but began to recoup their losses as US futures turned positive, suggesting there is still some momentum from last week’s risk rally that pushed the S&P 500 to a 15-month high.

Hopes were lifted last week that the Fed was headed for a one-and-done rate hike in July after US CPI decelerated more than expected in June, sparking a fierce rally on Wall Street, particularly for the Nasdaq.

However, Fed Governor Christopher Waller dented sentiment somewhat on Friday when he hinted that he could still support two further rate increases this year, putting the brakes on the rally.

An upbeat consumer sentiment survey from the University of Michigan also added to the caution, serving as a reminder to the markets that the upside risks to inflation haven’t completely dissipated.

The survey’s measures of consumer inflation expectations edged up in July. On Tuesday, the latest retail sales figures will be watched for clues on the strength of consumer spending in June.

However, equity traders will also have their eye on US earnings this week as tech heavyweights Tesla and Netflix will join the remaining big banks in reporting their Q2 financial results.

With stocks on Wall Street already so heavily overvalued, the stakes are high for the Big Tech going into this earnings season.

But as stock market bulls paused for breath, there was some relief for the US dollar, which plummeted to 15-month lows against a basket of currencies last week before the selloff eased on Friday.

The greenback is facing some downside pressure again on Monday and with few Fed speakers on the agenda this week, it might struggle to find much support.

If the upcoming earnings releases are broadly positive and we see risk appetite improving again, that’s not going to bode well for the dollar. However, there are also risks from the raft of CPI reports due from a number of countries, including Canada, Japan, New Zealand and the United Kingdom.

If inflation slows more than expected in other countries too, that might ease the pain for the dollar.

In commodities, oil futures slid more than 1% following China’s weak GDP print.

But gold is resisting any selloff attempts, trying to hold onto the $1,955/oz level in the hope of being able to have another go at overcoming resistance in the familiar $1,960/oz territory, which once again blocked advances last week.