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Euro, Yen Rise as Jackson Hole Outcome Sends Markets Scrambling

Euro, Yen Rise as Jackson Hole Outcome Sends Markets Scrambling

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro, Yen Rise as News-Flow from Jackson Hole Fuels Risk Aversion Anew
  • New Zealand Dollar Underperforms as Business Confidence Hits 6-Year Low
  • Eurozone CPI May Reveal Markets’ Outlook for ECB Policy Announcement

The Euro and the Japanese Yen outperformed in overnight trade as risk aversion swept financial markets anew. The slump in sentiment appeared to drive the unwinding of carry trades funded in the two low-yielding currencies.

The MSCI Asia Pacific regional benchmark stock index fell 0.6 percent as markets responded to news-flow emerging from the central bankers’ summit at Jackson Hole, Wyoming over the weekend. The prospect of tightening against a backdrop of global slowdown and market instability fears unnerved investors.

Federal Reserve Vice Chair Stanley Fischer hinted the FOMC may yet raise rates at next month’s policy meeting despite the recent slump in sentiment. BOE Governor Mark Carney also sounded hawkish, suggesting that rate increase considerations will enter the picture by year-end.

The risk-geared commodity bloc currencies understandably bore the brunt of eroding confidence in the G10 FX space. The New Zealand Dollar proved weakest on the session as dour economic data compounded sentiment-fueled selling. The ANZ Business Confidence gauge printed at -29.1 in August, the lowest since March 2009.

Looking ahead, the preliminary set of Augusts’ Eurozone CPI figures headlines the economic calendar. The core year-on-year inflation rate is expected to edge lower to 0.9 percent having hit a 15-month high at 1 percent in the prior month.

The markets’ response to the outcome may help illustrate investors’ mindset ahead of the ECB monetary policy announcement due later in the week. A soft print that weighs on the Euro may hint at building stimulus expansion bets, whereas a lackluster response would suggest traders expect Mario Draghi and company to remain on auto-pilot for now.

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Asia Session

GMTCCYEVENTACTEXPPREV
22:45NZDBuilding Permits (MoM) (JUL)20.4%--3.3%
23:50JPYLoans & Discounts Corp (YoY) (JUL)3.28%-2.74%
23:50JPYIndustrial Production (MoM) (JUL P) -0.6%0.1%1.1%
23:50JPYIndustrial Production (YoY) (JUL P) 0.2%0.8%2.3%
00:30AUDTD Securities Inflation (MoM) (AUG)0.1%-0.2%
00:30AUDTD Securities Inflation (YoY) (AUG)1.7%-1.6%
01:00AUDHIA New Home Sales (MoM) (JUL)-0.4%-0.5%
01:00NZDANZ Activity Outlook (AUG)12.2-19
01:00NZDANZ Business Confidence (AUG)-29.1--15.3
01:30AUDCompany Operating Profit (QoQ) (2Q)-1.9%-2.0%-0.3%
01:30AUDInventories SA (QoQ) (2Q)0.0%0.2%0.6%
01:30AUDPrivate Sector Credit (MoM) (JUL)0.6%0.5%0.4%
01:30AUDPrivate Sector Credit (YoY) (JUL)6.1%5.9%5.9%
03:00NZDMoney Supply M3 (YoY) (JUL)9.3%-9.5%
04:00JPYVehicle Production (YoY) (JUL)-5.9%--5.3%
05:00JPYHousing Starts (YoY) (JUL)7.4%11.0%16.3%
05:00JPYAnnualized Housing Starts (JUL)0.914M0.938M1.033M
05:00JPYConstruction Orders (YoY) (JUL)-4.0%-15.4%

European Session

GMTCCYEVENTEXPPREVIMPACT
06:00EURGerman Retail Sales (MoM) (JUL)1.1%-2.3%Medium
06:00EURGerman Retail Sales (YoY) (JUL)1.7%5.1%Medium
07:00CHFKOF Leading Indicator (AUG)100.399.8Low
07:00CHFTotal Sight Deposits (AUG 28)-463.4BLow
07:00CHFDomestic Sight Deposits (AUG 28)-394.7BLow
08:00EURItalian Retail Sales (MoM) (JUN)-0.2%-0.1%Low
08:00EURItalian Retail Sales (YoY) (JUN)-0.3%Low
09:00EUREurozone CPI Estimate (YoY) (AUG)0.1%0.2%High
09:00EUREurozone CPI Core (YoY) (AUG A) 0.9%1.0%High
09:00EURItalian CPI (MoM) (AUG P) 0.1%-0.1%Low
09:00EURItalian CPI (YoY) (AUG P) 0.1%0.2%Low
09:00EURItalian CPI - EU Harmonized (MoM) (AUG P) -0.2%-2.0%Low
09:00EURItalian CPI - EU Harmonized (YoY) (AUG P) 0.2%0.3%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.09091.10631.11241.12171.12781.13711.1525
GBPUSD1.51761.52831.53371.53901.54441.54971.5604

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

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