This has caught many off guard and has exposed the higher yielding commodity currency over the past several hours. In Japan, inflation contracted within expectation, while industrial production and unemployment data were better than consensus estimates. The BOJ Minutes generated attention after members voiced concerns that the volatile Yen and FX moves on other markets posed risks to the economy. RBNZ Bollard was on the wires but failed to provide any insights into future direction of monetary policy. Meanwhile, in the UK, GfK consumer confidence was released and managed to come in stronger than expected. Elsewhere, there were some rumors regarding additional China revaluation, but these were quickly brushed aside.
Overall, risk aversion is on the rise and this has helped to support the safe-haven status of both the Yen and USD. The Euro has dropped to fresh multi-day and yearly lows on Friday, now just shy of figure support at 1.3900. Asian equities have been hit hard following Thursday’s negative close in the US markets, and many are also starting to attribute the global equity weakness to the aggressive Obama proposals which are now seen as an unsettling sweep of reform, that could have a detrimental impact on the global economy. Japanese FinMin Kan has been out overnight voicing his opinion on the matter, saying that just because the US is proposing change, does not mean that Japan needs to do so as well.
Looking ahead, UK nationwide house prices (0.3% expected) are due out at 7:00GMT, followed by Eurozone unemployment (10.1% expected) and M3 (-0.1% expected) at 9:00GMT. Eurozone CPI (1.2% expected) then follows at 10:00GMT, with the Swiss KOF (1.71 expected) capping things off at 10:30GMT. US equity futures point to another lower open, while commodities are basically flat, with oil slightly higher and gold mildly offered.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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