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US Dollar May Shrug Off Soft PPI, Yen Aiming Higher on Risk Appetite

US Dollar May Shrug Off Soft PPI, Yen Aiming Higher on Risk Appetite

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Australian Dollar Soars as Firm Employment Data Trims RBA Rate Cut Bets
  • Yen May Continue Lower After Overnight Slump on Firming Risk Sentiment
  • US Dollar May Shrug Off Soft Headline PPI on Limited Fed Outlook Impact

The Australian Dollar outperformed in overnight trade, adding as much as 1 percent on average against its top counterparts, after December’s Employment figures topped economists’ forecasts (as expected). The report showed the economy added 37,400 jobs last month, topping calls for a 5,000 increase. The jobless rate fell to 6.1 percent, the lowest in four months. The Aussie’s advance tracked a jump in front-end bond yields, suggesting the upbeat data set poured cold water on the recent build in RBA interest rate cut speculation.

The Yen faced selling pressure, dropping as much as 0.4 percent against the majors, as Japan’s benchmark Nikkei 225 stock index launched a sharp recovery. The build in risk appetite sapped demand for the safety-linked currency. More of the same is hinted ahead as S&P 500 futures point firmly higher ahead of the opening bell in Europe, with relatively little on the economic data docket to disrupt sentiment-driven price action.

December’s US PPI report enters the spotlight later in the day. The headline year-on-year wholesale inflation rate is seen edging down to 1 percent, the lowest in 10 months. The soft result may not yield significant downside pressure on the US Dollar however.

The core PPI reading (which excludes the impact of energy prices) is seen edging upward to 1.9 percent, the highest since May. This suggests the Federal Reserve is likely to continue chalking up weak headline inflation to the transitory impact of dropping crude oil prices, meaning it won’t necessarily interpret the result as reason enough to delay interest rate hikes.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:45NZDFood Prices (MoM) (DEC)0.3%--0.5%
23:50JPYPPI (MoM) (DEC)-0.4%-0.3%-0.3%
23:50JPYPPI (YoY) (DEC)1.9%2.1%2.6%
23:50JPYMachine Orders (MoM) (NOV)1.3%4.4%-6.4%
23:50JPYMachine Orders (YoY) (NOV)-14.6%6.3%-4.9%
0:01GBPRICS House Price Balance (DEC)11%10%13%
0:30AUDEmployment Change (DEC)37.4K5.0K45.0K
0:30AUDUnemployment Rate (DEC)6.1%6.3%6.2%
0:30AUDFull Time Employment Change (DEC)41.6K-2.6K
0:30AUDPart Time Employment Change (DEC)-4.1K-42.3K
0:30AUDParticipation Rate (DEC)64.8%64.7%64.7%
0:30AUDRBA FX Transactions Govt (A$) (DEC)-1193M--381M
0:30AUDRBA FX Transactions Other (A$) (DEC)124M-49M
0:30AUDRBA FX Transaction (A$) (DEC)1081M-337M
1:30NZDREINZ House Price Index (MoM) (DEC)-1.0%-3.3%
1:30NZDREINZ House Price Index (YoY) (DEC)6.0%-6.0%
1:30NZDREINZ House Sales (YoY) (DEC)24.2%-6.5%
2:04CNYMoney Supply M2 (YoY) (DEC)12.2%12.5%12.3%
2:04CNYMoney Supply M1 (YoY) (DEC)3.2%3.3%3.2%
2:04CNYMoney Supply M0 (YoY) (DEC)2.9%4.0%3.5%
2:04CNYNew Yuan Loans (DEC)697.3B890.0B852.7B
2:04CNYAggregate Financing RMB (DEC)1690.0B1200.0B1146.3B
2:04CNYForeign Reserves (DEC)$3840.0B$3900.0B$3887.7B

European Session

GMTCCYEVENTEXPPREVIMPACT
9:00EURGerman GDP nsa (YoY) (2014)1.5%0.1%Medium
9:00EURGerman Budget Balance/GDP Ratio (2014)0.1%0.1%Low
10:00EUREurozone Trade Balance s.a. (€) (NOV)20.0B19.4BLow
10:00EUREurozone Trade Balance (€) (NOV)-24.0BLow

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.15491.16681.17291.17871.18481.19061.2025
GBPUSD1.49681.50921.51631.52161.52871.53401.5464

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

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