Dollar and Yen Rise on Global Slowdown Fears, Euro Eyes PMI Data

Talking Points

• Dollar, Yen Rise on Disappointing Australian and Chinese Economic Data
• Eurozone PMI Revisions May Raise the Stakes for ECB Policy Announcement

The US Dollar and Japanese Yen rose overnight as stocks declined, boosting demand for the go-to haven currencies. The MSCI Asia Pacific regional benchmark equity index fell 1 percent amid global slowdown fears in the wake of disappointing economic data. Australian GDP figures showed output grew 0.6 percent in the second quarter, missing expectations of a 0.7 percent increase. Separately, the AiG Performance of Services gauge showed the non-manufacturing sector contracted at the fastest pace in four months. Meanwhile, the analogous HSBC Services PMI fell to the lowest level in a year.

Final revisions of Augusts’ Eurozone Services PMIs headline the European economic calendar. Key Manufacturing PMI readings were revised lower in the week. More of the same on the service-sector components may point to a deeper slowdown in regional activity, reinforcing hopes for additional stimulus to emerge at Thursday’s ECB rate decision. As we discussed in our weekly forecast, a policy announcement that focuses exclusively on outlining operational details of the central bank’s new bond-buying scheme without offering anything on the growth front may weigh on the Euro and risky assets in general.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

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

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