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FOREX: US Dollar Slumps as Stocks Rise in Asian Trade

FOREX: US Dollar Slumps as Stocks Rise in Asian Trade

2011-02-08 06:38:00
Ilya Spivak, Sr. Currency Strategist
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Overnight Headlines

  • US Dollar Drops as Stocks Advance in Overnight Trade
  • UK Retail Sales, House Prices Outperform in January
  • Japan’s Current Account Surplus Swells on Export Gains

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3539

1.3745

GBPUSD

1.6089

1.6185

The Euro and the British Pound advanced in overnight trade, adding as much as 0.4 and 0.3 percent respectively against the US Dollar, as the greenback came under broad-based selling pressure (see below). We maintain a bearish outlook for EURUSD and GBPUSD.

Asia Session: What Happened

CCY

GMT

EVENT

ACT

EXP

PREV

NZD

23:00

QV House Prices (YoY) (JAN)

-1.5%

-

-0.9%

JPY

23:50

Japan Money Stock M2+CD (YoY) (JAN)

2.3%

2.3%

2.3%

JPY

23:50

Japan Money Stock M3 (YoY) (JAN)

1.8%

1.8%

1.8%

JPY

23:50

Bank Lending Banks Adjust. (YoY) (JAN)

-1.6%

-

-1.8%

JPY

23:50

Bank Lending Banks ex-Trust (JAN)

-1.9%

-2.1%

-2.1%

JPY

23:50

Bank Lending incl Trusts (YoY) (JAN)

-1.8%

-1.8%

-1.9%

JPY

23:50

Current Account Total (Yen) (DEC)

1195.3B

1130.0B

926.2B

JPY

23:50

Adjusted Current Account Total (¥) (DEC)

1555.9B

1530.8B

1145.1B

JPY

23:50

Current Account Balance (YoY) (DEC)

30.5%

24.2%

-15.7%

JPY

23:50

Trade Balance - BOP Basis (¥) (DEC)

768.8B

779.7B

259.7B

GBP

0:01

BRC Retail Sales Monitor (JAN)

2.3%

-

-0.3%

GBP

0:01

RICS House Price Balance (JAN)

-31%

-38%

-39%

AUD

0:30

Business Conditions (JAN)

-6

-

6

AUD

0:30

Business Confidence (JAN)

4

-

-3

JPY

4:30

Bankruptcies (YoY) (JAN)

-2.1%

-

-3.0%

JPY

5:00

Eco Watchers Survey: Current (JAN)

44.3

45.5

45.1

JPY

5:00

Eco Watchers Survey: Outlook (JAN)

47.2

-

43.9

The US Dollar came under broad-based selling pressure in overnight trade, down 0.2 percent on average against its major counterparts, as an advance across Asian stock exchanges sapped demand for the safety-linked currency. The MSCI Asia Pacific regional benchmark stock index added as much as 0.5 percent. The New Zealand Dollar outperformed against the greenback, capitalizing on its reinvigorated correlation with risk appetite.

UK Retail Sales rose 2.3 percent in the year to January according to a report from the British Retail Consortium, posting the strongest reading since March. BRC Director General Stephen Robertson was skeptical of the outcome however, saying performance only appeared strong “on the surface”, owing entirely to a short burst of spending at the beginning of the month as “clearance discounts and a last chance to beat the [increase in the value-added tax] got people buying.” Robertson added that “a range of pressures” continue to weigh down underlying consumer sentiment.

Separately, UK House Prices ticked higher, with a survey of real estate agents from the Royal Institute of Chartered Surveyors showing those reporting price declines in January outnumbered those showing gains by just 31 percent, the lowest in six months.

Japan’s Current Account surplus widened more than expected, printing at 1195.3 billion yen in December, as export growth accelerated for the third consecutive month. Overseas sales added 14 percent from the previous year, marking the fastest growth rate since September 2010. A slowdown in imports also helped push the headline figure higher, with inbound shipments adding 12.8 percent on an annualized basis.

Euro Session: What to Expect

CCY

GMT

EVENT

EXP

PREV

IMPACT

CHF

6:45

Unemployment Rate (JAN)

3.8%

3.8%

Medium

CHF

6:45

Unemployment Rate s.a. (JAN)

3.5%

3.6%

Medium

EUR

7:30

Bank of France Business Sentiment (JAN)

108

108

Low

EUR

7:45

French Central Government Balance (€) (DEC)

-

-140.7B

Low

EUR

7:45

French Trade Balance (€) (DEC)

-4.2B

-3.9B

Low

EUR

11:00

German Industrial Production (YoY) (DEC)

11.5%

11.1%

Medium

EUR

11:00

German Industrial Production (MoM) (DEC)

0.2%

-0.7%

Medium

German Industrial Production figures headline a quiet economic calendar, with expectations calling for output to add 0.2 percent in December having slipped 0.7 percent in the preceding month. Traders may overlook the marginal improvement however after factory orders printed far weaker than expected yesterday while the timely manufacturing PMI released last week pointed to a slowdown in activity in January, hinting that today’s outcome is already old news.

Elsewhere, the European Central Bank will announce the amount of loans allotted as part of its 1-month tender, with traders closely monitoring uptake to see if banks are rushing to snap up funds while benchmark rates remain at record lows. Strong demand may hint at growing concerns that institutions are starting to price in the risk that an ECB rate hike is relatively close at hand. Such an outcome may serve to boost the Euro given the currency’s close link with yield spreads.

A flurry of comments from central bank officials slated for this week will continue, with the Bank of England’s Andrew Bailey as well as the US Federal Reseve’s Jeffrey Lacker set to hit the wires before the closing bell in Europe.

For real time news and analysis, please visit http://www.dailyfx.com/real_time_news

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

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