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US Dollar Looks for Cues in Fed-Speak, Aussie Hits 20-Month Low

By , Currency Strategist
10 June 2013 07:00 GMT

The US Dollar looks to comments from the St. Louis Fed’s Bullard for QE3 taper guidance. The Australian Dollar hits 20-month low on soft Chinese economic data.

Talking Points

  • US Dollar Gains as Asian Markets Respond to Last Week’s NFP Report
  • Australian Dollar Hits 20-Month Low vs. USD on Chinese Economic Data
  • Yen Under Pressure as Japanese Stocks Lead Recovery in Risk Appetite
  • Fed-Speak in Focus as Markets Continue to Look for Fed QE3 Taper Clues

The US Dollar outperformed to start the trading week, rising against all of its major counterparts, as Asian markets responded to last week’s slightly better-than-expected US employment report. When the report initially crossed the wires on Friday, traders that feared an upside surprise might hasten the Fed’s hand cheered on the result, with a swell in risk appetite pulling Treasury yields higher and offering support to the greenback. Overnight performance appears to reflect follow-through on the same dynamic, with Japanese shares leading regional bourses higher. This in turn put pressure on the anti-risk Yen.

It was the Australian Dollar that bore the brunt of USD gains however in the wake of ominous Chinese economic data released over the weekend. Beijing reported that exports grew just 1 percent year-on-year in May, marking the smallest increase in 10 months. Separately, Industrial production growth unexpectedly slowed and new Yuan loans tumbled to a three-month low. Investors projected signs of slowdown in the Chinese economy onto Australia – which counts on the East Asian giant as its largest trading partner – and took them to argue for a greater chance of an RBA interest rate cut at the July policy meeting. The probability of a 25bps reduction is now priced-in at 53 percent according to data from Credit Suisse.

Looking ahead, a lackluster economic calendar in European hours and an empty one in the US session leave little in the way of continuation of established momentum. Stock index futures are sending mixed signals in late Asian hours however. Contracts tracking top European benchmarks are under pressure ahead of the opening bell while S&P 500 futures are pointing meaningfully higher. Fed-speak may ultimately tip the scales and yield near-term direction cues as James Bullard, President of the US central bank’s St. Louis branch, takes to the wires. Mr. Bullard is a voting member of the FOMC and traders will want to see if his remarks offer any guidance on a possible reduction in the size of QE3 asset purchases of the coming meetings of the policy-setting committee.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

1:30

CNY

Producer Price Index (YoY) (MAY)

-2.9%

-2.5%

-2.6%

1:30

CNY

Consumer Price Index (YoY) (MAY)

2.1%

2.5%

2.4%

2:15

CNY

Money Supply - M2 (YoY) (MAY)

15.8%

15.9%

16.1%

2:15

CNY

New Yuan Loans (MAY)

667.4B

815.0B

792.9B

5:30

CNY

Industrial Production YTD (YoY) (MAY)

9.4%

9.4%

9.4%

5:30

CNY

Industrial Production (YoY) (MAY)

9.2%

9.4%

9.3%

5:30

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (MAY)

20.4%

20.5%

20.6%

5:30

CNY

Retail Sales YTD (YoY) (MAY)

12.6%

12.6%

12.5%

5:30

CNY

Retail Sales (YoY) (MAY)

12.9%

12.9%

12.8%

22:45

NZD

Manufacturing Activity Volume s.a. (QoQ) (1Q)

-0.6%

-

1.4%

22:45

NZD

Manufacturing Activity (1Q)

0.2%

-

-0.1%

23:50

JPY

Gross Domestic Product Deflator (YoY) (1Q F)

-1.1%

-1.2%

-0.7%

23:50

JPY

Nominal Gross Domestic Product (QoQ) (1Q F)

0.6%

0.4%

0.1%

23:50

JPY

Gross Domestic Product Annualized (1Q F)

4.1%

3.5%

1.0%

23:50

JPY

Gross Domestic Product (QoQ) (1Q F)

1.0%

0.9%

0.3%

23:50

JPY

Current Account Total (¥) (APR)

750.0B

350.0B

1251.2B

23:50

JPY

Adjusted Current Account Total (¥) (APR)

852.7B

380.0B

342.4B

23:50

JPY

Trade Balance - BOP Basis (¥) (APR)

-818.8B

-729.9B

-219.9B

23:50

JPY

Current Account Balance (YoY) (APR)

100.8%

5.7%

-4.3%

23:50

JPY

Bank Lending Banks ex-Trust (MAY)

2.1%

2.2%

2.1%

23:50

JPY

Bank Lending incl. Trusts (YoY) (MAY)

1.8%

1.8%

1.7%

0:00

NZD

QV House Prices (YoY) (MAY)

7.1%

-

7.1%

4:30

JPY

Bankruptcies (YoY) (MAY)

-8.97%

-

-10.45%

5:00

JPY

Consumer Confidence (MAY)

45.7

44.7

44.5

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

Unemployment Rate (MAY)

3.0% (A)

3.1%

Medium

5:45

CHF

Unemployment Rate s.a. (MAY)

3.2% (A)

3.1%

Medium

6:00

JPY

Eco Watchers Survey: Current (MAY)

55.7 (A)

56.5

Medium

6:00

JPY

Eco Watchers Survey: Outlook (MAY)

56.2 (A)

57.8

Medium

7:15

CHF

Retail Sales (Real) (YoY) (APR)

-

-0.9%

Low

8:30

EUR

Euro-Zone Sentix Investor Confidence (JUN)

-11.3

-15.6

Low

9:00

EUR

Italian Gross Domestic Product (QoQ) (1Q F)

-0.5%

-0.5%

Low

9:00

EUR

Italian Gross Domestic Product (YoY) (1Q F)

-2.3%

-2.3%

Low

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3139

1.3272

GBPUSD

1.5426

1.5621

--- 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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10 June 2013 07:00 GMT