Risk appetite wanes as Yen strengthens

Apr 05, 12:51 pm
Yen

Today’s Economic events

  • Australia AIG services index 49.5 vs. 51.8 previously
  • Japan average cash earnings y/y 0.90% vs. 0.20%
  • New Zealand ANZ Commodity prices m/m -1.30% vs. 0.50% previously
  • Australia trade balance -3.41bn vs. -2.55bn
  • RBA leaves cash rate unchanged at 2.0%
  • Germany factory orders m/m -1.20% vs. 0.50%
  • Spain services PMI 55.3 vs. 54.2
  • Italy services PMI 51.2 vs. 54.3
  • France services PMI 49.9 vs. 51.2
  • Germany services PMI 55.1 vs. 55.5
  • Eurozone services PMI 53.1 vs. 54.1
  • UK services PMI 53.7 vs. 53.9
  • Eurozone retail sales m/m 0.20% vs. 0.20%
  • Canada trade balance -1.91bn vs. 0.9bn
  • US trade balance -47.1bn vs. -46.3bn

Coming Up

  • US final services PMI
  • US ISM non-manufacturing PMI
  • JOLTS job openings
  • New Zealand GDT price index

The markets started the day with a risk off mood prevailing strongly across the global markets. In Asia, the Nikkei225 closed down 2.42% while the Shanghai Composite managed to gain 1.46%. Despite Japan’s average cash earnings rising 0.90%, more than the forecasted 0.20%, it did little to help sentiment as the yen continued to firm as the day progressed. USDJPY was trading near a one-year low at 110.55, down nearly 0.72% for the day. The yen’s appreciation caught the attention of Japanese officials, who warned currency speculators on USDJPY and that authorities were keeping a close eye on the exchange rates for the yen. Despite a brief pullback after the comments, USDJPY resumed its downtrend.

Data from Australia today included the RBA’s rate statement which saw the central bank take a dovish stance on the Australian dollar’s recent appreciation against the Greenback. In the RBA’s monetary policy statement, references were made to the recent AUD’s strength which was seen as a problem for the economy despite a broad-based turnaround in commodities. The RBA left interest rates unchanged at 2.0% but kept its options open. Inflation remained a big worry for the central bank. Besides the RBA’s decision, trade balance numbers from Australia saw the trade deficit widen to A$3.41 billion. AUDUSD which started to retreat since yesterday continued to post a steady decline and is down 0.88% at the time of writing, trading at $0.753.

NZDUSD was also weaker down 0.88% at the time of writing ahead of Global dairy price data release.

In Europe, services PMI data across the region showed a soft print. The Eurozone services PMI index fell to 53.1, down from 54.0 in February. German factory orders data plummeted 1.20% missing estimates of 0.50% increase. EURUSD was also weaker today down 0.10% at the time of writing. The single currency briefly fell to session lows of $1.355 before trimming the losses to currently trade at 1.379.

In the UK, services PMI was soft, rising to 53.7 up from February’s 52.7. However, the combined manufacturing and construction PMI weighed on the prospects of a weaker GDP growth rate expected in the first quarter of 2016. After UK’s GDP was revised higher to 0.60% in Q4 of 2015, expectations are now looking for a print of 0.40% GDP growth in the first quarter of this year. GBPUSD is down 0.51%, trading near a 3-day low at $1.419

Equity markets in Europe were weaker with the German DAX falling 2.35% and the London FTSE100 down 1.31% at the time of writing.

The NY session opened with Canada and US trade balance numbers. Data released from Canada showed an increase in the trade deficit as exports fell sharply in February rising concerns on the monthly GDP data. In the US, trade balance numbers were slightly higher than expected as the trade deficit widened to 47.1 billion, more than the expected 46.3 billion. The US dollar remained muted to the release. Economic data from the US due later in the day includes the final services PMI and ISM non-manufacturing PMI.

US equity market futures are pointing to a weak opening today with the Dow futures down 0.71% and the S&P500 futures down 0.84% ahead of the opening bell.

Gold prices were lifted amid the risk off sentiment as the precious metal posted yet another 1.50% gain intraday. Gold rallied since the opening and is now trading near $1235 an ounce. WTI Crude Oil prices are however flat, down 0.11% trading close to yesterday’s lows. At the time of writing, WTI Crude Oil futures are trading at $35.40 a barrel.

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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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