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

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

Ilya Spivak, Head Strategist, APAC

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

GMTCCYEVENTACTEXPPREV
22:30AUDWeekly Consumer Confidence Index116.4-114.8
00:30AUDNew Motor Vehicle Sales (MoM) (FEB)-0.1%-0.4%
00:30AUDNew Motor Vehicle Sales (YoY) (FEB)2.3%-5.2%
00:30AUDRBA March Meeting Minutes --
03:35JPYBOJ Annual Rise in Monetary Base¥80t¥80t¥80t
03:35JPYBOJ Basic Balance Rate0.10%-0.10%
03:35JPYBOJ Macro Add-On Balance Rate0.00%-0.00%
03:35JPYBOJ Policy Rate-0.10%-0.10%-0.10%
04:30JPYIndustrial Production (MoM) (JAN F)3.7%-3.7%
04:30JPYIndustrial Production (YoY) (JAN F)-3.8%--3.8%
04:30JPYCapacity Utilization (MoM) (JAN)2.6%--1.0%
04:30JPYTertiary Industry Index (MoM) (JAN)1.5%0.3%-0.6%
06:30JPYBOJ’s Kuroda Holds Press Conference ---

European Session

GMTCCYEVENTEXPPREVIMPACT
10:00EUREmployment (QoQ) (4Q)-0.3%Low
10:00EUREmployment (YoY) (4Q)-1.1%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.08891.10191.10871.11491.12171.12791.1409
GBP/USD1.39941.41761.42791.43581.44611.4541.4722

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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