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FOREX: Yen Tumbles, Dollar Extends Gains as Earthquake Strikes Japan

FOREX: Yen Tumbles, Dollar Extends Gains as Earthquake Strikes Japan

2011-03-11 07:36:00
Ilya Spivak, Sr. Currency Strategist
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Overnight Headlines

  • Yen Tumbles as Massive Earthquake Hits Japan
  • Chinese Economic Data Set Passes Unnoticed

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3772

1.3875

GBPUSD

1.6003

1.6161

The Euro and the British Pound were little changed in overnight trade, correcting higher for much of the session until a sharp surge in Dollar strength reversed earlier gains ahead of the opening bell in Europe (see below). We remain short NZDUSD.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Food Prices (MoM) (FEB)

0.1%

-

1.8%

2:00

CNY

Consumer Price Index (YoY) (FEB)

4.9%

4.8%

4.9%

2:00

CNY

Producer Price Index (YoY) (FEB)

7.2%

7.0%

6.6%

2:00

CNY

Industrial Production (YoY) (FEB)

14.9%

13.0%

-

2:00

CNY

Industrial Production YTD (YoY) (FEB)

14.1%

13.3%

-

2:00

CNY

Retail Sales YTD (YoY) (FEB)

15.8%

19.0%

-

2:00

CNY

Retail Sales (YoY) (FEB)

11.6%

19.0%

-

2:00

CNY

Fixed Assets Inv Urban YTD (YoY) (FEB)

24.9%

23.0%

-

2:00

NZD

Non Resident Bond Holdings (MAR)

63.1%

-

63.3%

Currency markets were quiet for much of the overnight session, with the majors correcting narrowly higher against the US Dollar after yesterday’s sharp rally in the benchmark unit. Volatility would only enter the picture just ahead of the opening bell in Europe as an 8.8-magnitude earthquake struckJapan, sending the Yen sharply lower against the greenback and reverberating across other USD-based pairs. The Japanese currency dropped as much as 0.4 percent on average against its top counterparts.

On the data front, Chinese Consumer Price Index figures printed narrowly higher than expected at 4.9 percent in the year to February, showing the annual inflation rate held unchanged from the previous month. Retail Sales expanded 11.6 percent – the least in two years – over the same period, while Industrial Production accelerated for the third month to add 14.9 percent. The data set passed largely unnoticed, with the mixed results offering no clear bearing on the pace of forthcoming Chinese monetary tightening efforts.

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German Consumer Price Index (MoM) (FEB F)

0.5%

0.5%

Medium

7:00

EUR

German Consumer Price Index (YoY) (FEB F)

2.0%

2.0%

Medium

7:00

EUR

German CPI - EU Harmonised (MoM) (FEB F)

0.6%

0.6%

Medium

7:00

EUR

German CPI- EU Harmonised (YoY) (FEB F)

2.2%

2.2%

Medium

7:45

EUR

French Current Account (€) (JAN)

-

-5.4B

Low

9:00

EUR

Italian Gross Domestic Product (YoY) (4Q F)

1.3%

1.3%

Low

9:00

EUR

Italian Gross Domestic Product (QoQ) (4Q F)

0.1%

0.1%

Low

9:30

GBP

Producer Price Index Output nsa (MoM) (FEB)

0.6%

1.0%

Medium

9:30

GBP

Producer Price Index Output nsa (YoY) (FEB)

5.2%

4.8%

Medium

9:30

GBP

Producer Price Index Output Core nsa (MoM) (FEB)

0.4%

0.7%

Low

9:30

GBP

Producer Price Index Output Core nsa (YoY) (FEB)

3.4%

3.2%

Low

9:30

GBP

Producer Price Index Input nsa (MoM) (FEB)

1.5%

1.7%

Low

9:30

GBP

Producer Price Index Input nsa (YoY) (FEB)

14.4%

13.4%

Low

The docket of continental European economic data is relatively tame, putting the spotlight on a summit of Euro Zone leaders due to begin at 16:00 GMT in Brussels. The topic of discussion will the “competitiveness”, with traders on the lookout for any clues on the climate of negotiations ahead of the widely anticipated March 25 meeting that is expected to produce a “grand bargain” on dealing with sovereign risk within the currency bloc.

Turning to the UK, traders continue to keep a close eye on anything that could yield clues on the timing for the first rate hike from the Bank of England after another non-event monetary policy announcement earlier this week. This puts the onus on February’s Producer Price Index report, with wholesale inflation due to accelerate to a 28-month high of 5.2 percent. Markets will also keep an eye on a speech from BOE Governor Mervyn King as he delivers a speech on stability of the international monetary and financial system, although nothing will hit the wires until 20:45 GMT when European markets will have already left for the weekend.

On the sentiment front, stock index futures are tracking sharply lower ahead of the opening bell, hinting the safety-linked US Dollar will remain well supported amid continued risk aversion through the end of the trading week. A pickup in US Retail Sales in February may offset a bit of negativity, but any optimism to be had therein will be counter balanced by a decline on March’s preliminary University of Michigan Consumer Confidence gauge.

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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