US Dollar May Rise Alongside Yen as Aussie Falls on FOMC Jitters

2016-03-15 07:14:00

Talking Points:

Yen gains, commodity-bloc FX weakens as risk aversion sweeps Asia markets
Sentiment slump likely reflects pre-FOMC jitters, status-quo BOJ rates stance
Upside surprises on US Retail Sales, PPI figures may amplify risk-off mood

Financial markets’ mood soured in overnight trade, with the sentiment-sensitive Australian, Canadian and New Zealand Dollars dropping alongside stock prices while the anti-risk Japanese Yen advanced. The MSCI Asia Pacific regional benchmark equity index fell nearly 1 percent in a move that appeared to reflect pre-positioning ahead of this week’s FOMC policy announcement.

We noted yesterday that risk-off momentum may emerge as traders weigh the possibility that the central bank will opt for hawkish rhetoric paving the way for a more aggressive 2016 rate hike path than investors currency envision. Selling pressure was compounded by the Bank of Japan, which opted not to pursue further stimulus expansion after unexpectedly introducing a negative-rate regime in January.

Looking ahead, a quiet economic calendar in European trading hours is likely to see markets looking ahead to US news-flow for direction cues. February’s Retail Sales and PPI figures are due to cross the wires. Receipts are expected to fall 0.1 percent from the prior month while the core wholesale inflation rate is seen rising to 1.2 percent, the highest in 13 months.

Realized outcomes on US data releases have notably improved relative to consensus forecasts over recent weeks, hinting that analysts are underestimating the economy’s vigor and opening the door for upside surprises. The pick-up in data has been mirrored in rebuilding 2016 rate hike bets and more of the same may sharpen pre-FOMC jitters and fuel amplify risk aversion while boosting the US Dollar.

Have markets matched DailyFX expectations so far in 2016? See our forecast to find out!

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:30	AUD	Weekly Consumer Confidence Index	116.4	-	114.8
00:30	AUD	New Motor Vehicle Sales (MoM) (FEB)	-0.1%	-	0.4%
00:30	AUD	New Motor Vehicle Sales (YoY) (FEB)	2.3%	-	5.2%
00:30	AUD	RBA March Meeting Minutes		-	-
03:35	JPY	BOJ Annual Rise in Monetary Base	¥80t	¥80t	¥80t
03:35	JPY	BOJ Basic Balance Rate	0.10%	-	0.10%
03:35	JPY	BOJ Macro Add-On Balance Rate	0.00%	-	0.00%
03:35	JPY	BOJ Policy Rate	-0.10%	-0.10%	-0.10%
04:30	JPY	Industrial Production (MoM) (JAN F)	3.7%	-	3.7%
04:30	JPY	Industrial Production (YoY) (JAN F)	-3.8%	-	-3.8%
04:30	JPY	Capacity Utilization (MoM) (JAN)	2.6%	-	-1.0%
04:30	JPY	Tertiary Industry Index (MoM) (JAN)	1.5%	0.3%	-0.6%
06:30	JPY	BOJ’s Kuroda Holds Press Conference	-	-	-