Forex Afternoon Wrap – 12/08

Aug 12, 12:51 pm
Forex Daily Summary

China currency moves continue to shock the markets

Key Notes:

  • Japan PPI y/y -3.0% vs. -2.9%
  • Australia Westpac Consumer sentiment 7.8% vs. -3.2% previously
  • Australia Wage price index q/q 0.6% vs. 0.6%
  • Japan revised industrial production m/m 1.1% vs. 0.8%
  • Japan tertiary industry activity m/m 0.3% vs. 0.1%
  • China industrial production y/y 6.0% vs. 6.7%
  • China retail sales y/y 10.5% vs. 10.6%
  • UK Average earnings index 3m/y 2.4% vs. 2.8%; unemployment rate 5.6% unchanged; claimant count change -4.9k vs. 1.4k
  • Switzerland ZEW economic expectations 5.9 vs. -5.4 previously
  • Eurozone industrial production m/m -0.4% vs. -0.1%

Later

  • JOLTS Job openings
  • Crude oil inventories

The currency markets were volatile since the start of day today as China continued to devalue to the Yuan against the US dollar. The monetary policy move by China has affected other currencies in the region including the Aussie and the Kiwi dollars. However the move today was a lot less subdued with the Kiwi as the NZDUSD reversed its losses since the start of the European trading session, while the Aussie was a lot less slow. NZDUSD gained over 1.15% on the day after dipping to a 12 month low below 0.64750. The AUDUSD also saw similar but subdued moves as the currency gained 0.8% for the day after hitting lows below 0.72260.

The Yen however reacted strongly to the China currency moves as USDJPY fell from the daily highs of 125.260 to lose over -0.8% for the day as USDJPY briefly tested lows below 123.985.

Economic data from Asian included the PPI which fell -3.0% below estimates of -2.9%. From Australia, the wage price index for the quarter was at a modest 0.6%, up from 0.5% previously. Japan’s economic data saw the revised industrial production which gained 1.1% for the month above estimates. China’s retail sales for the year stood at 10.5% softly below the 10.6% expectations. However, industrial production fell to 6% below estimates of 6.7%.

In the European trading session, the Euro continued its strong rally as Greece expects to clinch the deal including the approval from other regional national parliaments. EURUSD gained over 1% for the day from the day’s open and the currency is expected to be supported above the 1.10 handle.

From the UK, the monthly jobs report was soft with unemployment rate being steady at 5.6% while the average earnings index for the month fell 2.4%. The Cable was muted to the news but soon surged rising 0.3% for the day to briefly test the highs above 1.563.

In the US trading session there are no major market moving events lined up. The markets were expecting to see Fed’s Dudley talk about the currency devaluation and the impact on the US Dollar but he refrained from making any specific comments on China.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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