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Dollar, Yen Vulnerable as Risk Appetite Recovery Aims to Continue

Dollar, Yen Vulnerable as Risk Appetite Recovery Aims to Continue

2012-08-07 08:15:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

  • Dollar, Yen Sold on Waning Haven Demand as Stocks Rise in Asia
  • Soft UK, Eurozone Economic Data Unlikely to Derail Risk-On Tone
  • Australian Dollar Outperforms as RBA Stays in Wait-and-See Mode

The US Dollar and the Japanese Yen declined in overnight trade as Asian stocks advanced, denting demand for the go-to haven currencies. The MSCI Asia Pacific regional benchmark stock index rose 0.6 percent, bolstered by reports of German support for ECB efforts to trim periphery borrowing costs. Arguments in favor of further QE from the Fed’s Eric Rosengren and John Williams, Presidents of the central bank’s Boston and San Francisco branches respectively, were likewise supportive.

The Australian Dollar narrowly outperformed after the Reserve Bank of Australia left the benchmark interest rate unchanged at 3.5 percent, as expected. The statement accompanying the policy announcement continued to project a wait-and-see posture, hinting RBA Governor Glenn Stevens and company are in no hurry to resume the easing cycle.

An update on European economic growth environment comes in the form of UK Industrial Production and Italian GDP figures in the hours ahead. The former release is expected to show output fell 3.5 percent in June, marking the sharpest monthly drop in a decade, while the latter confirms the Eurozone’s third-largest economy shrank for a third consecutive quarter. Separately, German Factory Orders are expected to slip 0.8 percent, reinforcing fears of spreading malaise from the periphery and into the core of the currency bloc.

While certainly not supportive, these outcomes reinforce already well-established expectations of a downturn in regional European growth rather than offer something new into the equation. With that in mind, it seems unlikely that the day’s data set has scope to generate meaningful risk aversion. Indeed, S&P 500 stock index futures are pointing firmly higher, hinting the risk-on mood noted overnight is likely to carry forward.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Average Hourly Earnings (QoQ) (2Q)

0.2%

0.5%

1.3%

22:45

NZD

Private Wages ex Overtime (QoQ) (2Q)

0.5%

0.6%

0.5%

22:45

NZD

Labor Cost Private Sector (QoQ) (2Q)

0.5%

0.5%

0.5%

23:01

GBP

BRC Sales Like-For-Like (YoY) (JUL)

0.1%

-0.2%

1.4%

23:50

JPY

Official Reserve Assets ($) (JUL)

1272.8B

-

1270.6B

4:30

AUD

RBA Rate Decision (AUG 7)

3.50%

3.50%

3.50%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

Unemployment Rate s.a. (JUL)

2.9% (A)

2.9%

Medium

5:45

CHF

Unemployment Rate (JUL)

2.7% (A)

2.7%

Medium

7:00

CHF

Foreign Currency Reserves (JUL)

406.5B (A)

365.1B

Low

7:15

CHF

Consumer Price Index (MoM) (JUL)

-0.5% (A)

-0.3%

Medium

7:15

CHF

Consumer Price Index (YoY) (JUL)

-0.7% (A)

-1.1%

Medium

7:15

CHF

CPI - EU Harmonised (YoY) (JUL)

-0.3% (A)

-1.2%

Medium

7:15

CHF

CPI - EU Harmonised (MoM) (JUL)

-0.8% (A)

-0.2%

Medium

8:00

EUR

Italian Industrial Production sa (MoM) (JUN)

-1.0%

0.8%

Low

8:00

EUR

Italian Industrial Production nsa (YoY) (JUN)

-

-6.8%

Low

8:00

EUR

Italian Industrial Production wda (YoY) (JUN)

-6.5%

-6.9%

Low

8:30

GBP

Industrial Production (MoM) (JUN)

-3.5%

1.0%

Medium

8:30

GBP

Industrial Production (YoY) (JUN)

-5.3%

-1.6%

Medium

8:30

GBP

Manufacturing Production (MoM) (JUN)

-4.3%

1.2%

Low

8:30

GBP

Manufacturing Production (YoY) (JUN)

-5.7%

-1.7%

Low

9:00

EUR

Italy to Approve Spending Cuts

-

-

-

9:00

EUR

Italian GDP s.a. and w.d.a. (QoQ) (2Q P)

-0.8%

-0.8%

Medium

9:00

EUR

Italian GDP s.a. and w.d.a. (YoY) (2Q P)

-2.5%

-1.4%

Medium

10:00

EUR

German Factory Orders n.s.a. (YoY) (JUN)

-7.0%

-5.4%

Medium

10:00

EUR

German Factory Orders s.a. (MoM) (JUN)

-0.8%

0.6%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2347

1.2449

GBPUSD

1.5545

1.5664

--- 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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