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Yen, US Dollar Drop in Tandem on Dovish Fed Outlook Shift

Yen, US Dollar Drop in Tandem on Dovish Fed Outlook Shift

Ilya Spivak,

Talking Points:

  • Yen and US Dollar Drop in Tandem as Dovish Fed Outlook Shift Boosts Risk
  • S&P 500 Stock Index Futures Hint Overnight Dynamics Poised to Continue
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The Japanese Yen underperformed in overnight trade in what appeared to be an improvement in risk appetite. Traders shrugged off a worrisome set of Chinese trade figures that showed the largest imports drop in three months (-13.8% y/y), a possible sign of slowing demand in the world’s second-largest economy, apparently opting to focus on US monetary policy expectations instead.

Indeed, the US Dollar proved to be the weakest currency on the session, with prices dropping alongside yields on US Treasuries. That seems to suggest deterioration in US monetary policy expectations just 10 days before this month’s much-anticipated FOMC meeting.

Investors appear to dread the prospect of monetary tightening in the US against a backdrop of rising global slowdown and financial market instability concerns. With that in mind, the possibility of a delay may yield the opposite effect, boosting sentiment.

The timing of the move is a bit suspect considering the absence of high-profile catalyst to trigger it. A Wall Street Journal article citing a worried tone from San Francisco Fed President John Williams – heretofore a strong supporter of tightening in 2015 – may be one explanation. The return of liquidity following the US market holiday on Monday offersanother explanation, painting price action as pent-up follow-through on Friday’s disappointing US nonfarm payrolls print.

Futures tracking the S&P 500 stock index are pointing firmly higher ahead of the opening bell on Wall Street. Thissuggests that the risk-on move is may carry forward, fostering continuation of overnight trading patterns.

A revised set of second-quarter Eurozone GDP figures headlines the data docket in Europe. Expectations point to confirmation of the flash estimate putting the quarterly increase in output at 0.3 percent. An upside surprise in line with the recent string of outperformance on data from the currency bloc relative to consensus forecasts may undermine ECB QE expansion bets and send the Euro higher. Such an outcome may likewise amplify support for risk appetite.


Asia Session

22:00NZDANZ Truckometer Heavy (MoM) (AUG)-0.6%--0.3%
22:45NZDMfg Activity Volume QoQ (2Q)-0.2%--0.3%
22:45NZDMfg Activity SA QoQ (2Q)0.4%--2.6%
23:01EURGerman Manpower Employment Outlook (4Q)6.0%6.0%
23:01GBPBRC Sales Like-For-Like (YoY) (AUG)-1.0%0.9%1.2%
23:30AUDWeekly Consumer Confidence Index (Sep 06)106.7-113.3
23:50JPYBoP Current Account Balance (JUL) (¥)1808.6B1732.5B558.6B
23:50JPYBoP Current Account Adjusted (JUL) (¥)1321.8B1258.0B1300.3B
23:50JPYTrade Balance BoP Basis (JUL) (¥)-108.0B-80.0B102.6B
23:50JPYGDP SA QoQ (2Q F)-0.3%-0.5%-0.4%
23:50JPYGDP Annualized SA QoQ (2Q F)-1.2%-1.8%-1.6%
23:50JPYGDP Nominal SA QoQ (2Q F)0.1%0.0%0.0%
23:50JPYGDP Deflator (YoY) (2Q F)1.5%1.6%1.6%
23:50JPYGDP Private Consumption QoQ (2Q F)-0.7%-0.8%-0.8%
23:50JPYGDP Business Spending QoQ (2Q F)-0.9%-0.9%-0.1%
23:50JPYBank Lending Incl Trusts (YoY) (AUG)2.7%2.6%2.6%
23:50JPYBank Lending Ex-Trusts (YoY) (AUG)2.8%-2.7%
00:01JPYManpower Survey (4Q)23.0-22.0
00:01CNYManpower Survey (4Q)5.0%-13.0%
01:30AUDNAB Business Conditions (AUG)11.0-6.0
01:30AUDNAB Business Confidence (AUG)1.0-4.0
02:33CNYExports (CNY) (YoY) (AUG)-6.1%--8.9%
02:33CNYImports (CNY) (YoY) (AUG)-14.3%--8.6%
02:33CNYTrade Balance (CNY) (AUG)368.03B-263.0B
03:03CNYExports ($) (YoY) (AUG)-5.5%-6.6%-8.3%
03:03CNYImports ($) (YoY) (AUG)-13.8%-7.9%-8.1%
03:07CNYTrade Balance ($) (AUG)$60.24B$48.0B$43.03B
04:30JPYBankruptcies ((YoY)) (AUG)-13.06%--10.77%
05:00JPYEco Watchers Survey: Current (AUG)49.352.051.6
05:00JPYEco Watchers Survey: Outlook (AUG)48.252.451.9

European Session

05:45CHFUnemployment Rate (AUG)3.1%3.1%Medium
05:45CHFUnemployment Rate SA (AUG)3.3%3.3%Medium
06:00EURGerman Trade Balance (JUL)23.5B24.0BMedium
06:00EURGerman Current Account Balance (JUL)21.5B24.4BMedium
06:00EURGerman Exports SA (MoM) (JUL)1.0%-1.1%Medium
06:00EURGerman Imports SA (MoM) (JUL)0.7%-0.8%Medium
06:00EURGerman Labor Costs WDA (YoY) (2Q)-3.2%Low
06:00EURGerman Labor Costs SA (QoQ) (2Q)-1.1%Low
09:00EUREurozone GDP SA (QoQ) (2Q P)0.3%0.3%High
09:00EUREurozone GDP SA (YoY) (2Q P)1.2%1.2%High
09:00EUREurozone Household Cons (QoQ) (2Q)0.3%0.5%Low
09:00EUREurozone Gov’t Expenditure (QoQ) (2Q)0.2%0.6%Low
09:00EUREurozone Gross Fix Cap (QoQ) (2Q)0.3%0.8%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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