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

2012-07-12 09:08:00 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