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US Dollar, Yen Aim to Extend Gains as Risk Aversion Grips Markets

US Dollar, Yen Aim to Extend Gains as Risk Aversion Grips Markets

Ilya Spivak, Head Strategist, APAC

Talking Points

  • Dollar, Yen Soar After Fed Minutes Fail to Boost QE3 Expectations
  • Aussie Sinks as Data Shows Economy Unexpectedly Shed 27K Jobs
  • Bank of Japan Reshuffles Stimulus Funds but Withholds Expansion

The US Dollar and Japanese Yen soared overnight as Asian stocks declined, boosting demand for the go-to haven currencies. The MSCI Asia Pacific regional benchmark equity index slid 1.5 percent after minutes from June’s FOMC meeting failed to advance expectations of a QE3 program to be unveiled in the near term.

The Yen outperformed as the Bank of Japan opted not to materially increase stimulus efforts, reshuffling funds between the credit-loan and asset-purchase programs instead. The Australian Dollar bore the brunt of the selloff as June’s Employment figures disappointed, showed the economy unexpectedly shed 27,000 jobs. May’s hiring increase was also revised sharply lower. The New Zealand Dollar was not far behind, with risk aversion compounded by a soft manufacturing PMI print.

S&P 500 stock index futures are pointing sharply lower, pointing to more of the same ahead. Eurozone Industrial Production figures headline a lackluster European data docket. Output is expected to fall 3.2 percent in the year to May, marking the largest drop since December 2009. Dismal economic conditions in the currency bloc are nothing new however and the outcome seems unlikely to generate a significant response from price action barring a major upside surprise. Italy will also sell €7.5 billion in 12-month bills.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

NZD

Business NZ PMI (JUN)

50.2

-

55.8 (R+)

22:45

NZD

Food Prices (MoM) (JUN)

1.4%

-

0.3%

1:00

NZD

ANZ Consumer Confidence (MoM)

4.4%

-

-7.1%

1:00

AUD

Consumer Inflation Expectation (JUL)

3.3%

-

2.3%

1:00

NZD

ANZ Consumer Confidence Index (JUL)

110.5

-

105.8

1:30

AUD

Employment Change (JUN)

-27.0K

0.0K

27.8K (R-)

1:30

AUD

Full Time Employment Change (JUN)

-33.5K

-

36.4K (R-)

1:30

AUD

Part Time Employment Change (JUN)

6.6K

-

-8.6K (R-)

1:30

AUD

Unemployment Rate (JUN)

5.2%

5.2%

5.1%

1:30

AUD

Participation Rate (JUN)

65.2%

65.5%

65.4% (R-)

3:51

JPY

Bank of Japan Rate Decision (JUL 12)

0.10%

0.10%

0.10%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:30

EUR

French CPI (MoM) (JUN)

0.0% (A)

-0.1%

Low

5:30

EUR

French CPI (YoY) (JUN)

1.9% (A)

2.0%

Low

5:30

EUR

French CPI - EU Harmonised (MoM) (JUN)

0.1% (A)

-0.1%

Low

5:30

EUR

French CPI - EU Harmonised (YoY) (JUN)

2.3% (A)

2.3%

Low

5:30

EUR

French CPI Ex Tobacco (JUN)

124.78 (A)

124.73

Low

6:00

EUR

German Wholesale Price Index (MoM) (JUN)

-1.1% (A)

-0.7%

Low

6:00

EUR

German Wholesale Price Index (YoY) (JUN)

1.1% (A)

1.7%

Low

8:00

EUR

ECB Publishes July Monthly Report

-

-

Medium

9:00

EUR

Italy to Sell €7.5B in 361-Day Bills

-

-

Medium

9:00

EUR

Euro-Zone Industrial Production (MoM) (MAY)

0.0%

-1.1%

Medium

9:00

EUR

Euro-Zone Industrial Production (YoY) (MAY)

-3.2%

-2.4%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2166

1.2287

GBPUSD

1.5430

1.5558

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

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

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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