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Yen Soars as China Sets Soft GDP Goal, Stoking Global Slowdown Fears

By , Currency Strategist
05 March 2012 08:20 GMT

Talking Points

  • Yen Soars as China Drops 2012 GDP Growth Target Below 8 Percent
  • Softer Services PMI/ISM Readings to Reinforce Global Slowdown Fears
  • Dallas Fed’s Fisher May Boost Risk Aversion with Anti-QE3 Rhetoric

The Japanese Yen soared overnight, adding as much as 0.9 percent on average against its leading counterparts, as a selloff across Asian bourses stocked safe-haven demand. The MSCI Asia Pacific regional benchmark stock index sank after Chinese Premier Wen Jiabao said his country will officially target a GDP growth rate of 7.5 percent in 2012. This marks the lowest goal since 2004 and – if achieved – would amount to the weakest performance since 1990. The US Dollar likewise rose against overtly growth-linked currencies including its Australian, Canadian and New Zealand namesakes but performance was mixed against the other non-Yen majors.

Looking ahead, global slowdown concerns appear like to remain in focus. UK Services PMI is expected to print lower in February, snapping a three-month winning streak. The analogous US ISM Non-Manufacturing Composite gauge is likewise expected to pull back over the same period after hitting an 11-month high in January. Futures tracking the benchmark S&P 500 stock index – a proxy for overall sentiment trends – are pointing sharply lower to suggest risk aversion remains the dominant theme across the markets. A speech from Dallas Fed President Richard Fisher on “The State of the Economy” may also prove market-moving, particularly if the remarks echo the moderation in dovish rhetoric seen in Ben Bernanke’s testimony last week. Against the current backdrop, further evidence that a QE3 program is becoming increasingly unlikely would probably amplify risk-averse tendencies.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Net Migration s.a. (JAN)

-650

-

-530 (R-)

21:45

NZD

Value of All Buildings (4Q)

2.9%

2.0%

-1.6% (R+)

22:30

AUD

AiG Performance of Service Index (FEB)

46.7

-

51.9

23:30

AUD

TD Securities Inflation (MoM) (FEB)

0.1%

-

0.2%

23:30

AUD

TD Securities Inflation (YoY) (FEB)

2.0%

-

2.2%

0:01

GBP

Lloyds Business Barometer (FEB)

1

-

-11

0:30

AUD

Company Operating Profit (QoQ) (4Q)

-6.5%

0.0%

4.8%

0:30

AUD

Inventories (4Q)

1.4%

0.3%

-1.1%

0:30

AUD

ANZ Job Advertisements (MoM) (FEB)

3.3%

-

7.5% (R+)

2:30

CNY

China HSBC Services PMI (FEB)

53.9

-

52.5

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:15

CHF

Retail Sales (Real) (YoY) (JAN)

-

0.6%

Low

8:45

EUR

Italian PMI Services (FEB)

45.2

44.8

Low

8:50

EUR

French PMI Services (FEB F)

50.3

50.3

Low

8:55

EUR

German PMI Services (FEB F)

52.6

52.6

Medium

9:00

EUR

Euro-Zone PMI Composite (FEB F)

49.7

49.7

Medium

9:00

EUR

Euro-Zone PMI Services (FEB F)

49.4

49.4

Medium

9:00

EUR

Italy PPI (YoY) (JAN)

3.4%

4.0%

Low

9:00

EUR

Italy PPI (MoM) (JAN)

0.6%

0.1%

Low

9:30

GBP

PMI Services (FEB)

54.9

56

Medium

9:30

EUR

Euro-Zone Sentix Investor Confidence (MAR)

-5

-11.1

Low

9:30

GBP

Official Reserves (Changes)

-

$2477M

Low

10:00

EUR

Euro-Zone Retail Sales (MoM) (JAN)

-0.1%

-0.3%

Medium

10:00

EUR

Euro-Zone Retail Sales (YoY) (JAN)

-1.5%

-1.3%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3093

1.3292

GBPUSD

1.5732

1.5926

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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05 March 2012 08:20 GMT