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Japanese Yen Rebounds After Suffering Largest Drop in 18 Months

Japanese Yen Rebounds After Suffering Largest Drop in 18 Months

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Yen outperformed overnight as prices retraced BOJ-inspired selloff
  • ECB officials’ commentary may overshadow German IFO survey
  • Q1 US corporate earnings may impact FX via risk appetite trends

The Japanese Yen outperformed in overnight trade, rising against all of its G10 counterparts in a move that appeared corrective following Friday’s sharp selloff. The unit issued its largest drop since October 2014 amid speculation that the Bank of Japan may expand stimulus efforts at this week’s policy meeting. An expansion of asset purchases as well as the introduction of negative lending rates in addition to the recent implementation of negative deposit rates may emerge.

The economic calendar is relatively quiet in European trading hours. The release of Germany’s IFO Survey of business confidence may pass without a significant reaction from the Euro considering its limited implications for near-term monetary policy bets. Comments from ECB policymakers Vitor Constancio, Benoit Coeure and Daniele Nouy may prove more noteworthy if the group stresses the central bank’s capacity for greater easing. This is likely to weigh on the single currency and boost risk appetite, offering support to sentiment-sensitive currencies such as the Australian and New Zealand Dollars.

Later in the day, the spotlight shifts to the resumption of the first-quarter corporate earnings reporting season. Results from Haliburton, Xerox and Zions Bancorp are in focus. Traders are looking to the outcomes to gauge the overall global business cycle and inform sentiment trends. Lackluster readings may sour confidence and punish high-yielding FX alongside share prices while upbeat ones promise the opposite dynamics. Thus far, sales and earnings have topped analysts’ estimates by 0.27 and 4.03 percent respectively, with 130 of the companies included in the benchmark S&P 500 index reporting.

Where are the markets going in the second quarter? See our forecasts here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

PPI Services (YoY) (MAR)

0.2%

0.2%

0.2%

5:00

JPY

Leading Index CI (FEB F)

96.8

-

99.8

5:00

JPY

Coincident Index (FEB F)

110.7

-

110.3

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

ECB's Constancio, Coeure, Nouy Speak in Frankfurt

-

-

Medium

7:00

CHF

Total Sight Deposits

-

489.2b

Low

7:00

CHF

Domestic Sight Deposits

-

423.8b

Low

8:00

EUR

German IFO Business Climate (APR)

107.1

106.7

Medium

8:00

EUR

German IFO Current Assessment (APR)

113.8

113.8

Medium

8:00

EUR

German IFO Expectations (APR)

100.9

100

Medium

10:00

GBP

CBI Trends Total Orders (APR)

-17

-14

Low

10:00

GBP

CBI Trends Selling Prices (APR)

-

-1

Low

10:00

GBP

CBI Business Optimism (APR)

-

-4

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1068

1.1159

1.1190

1.1250

1.1281

1.1341

1.1432

GBP/USD

1.4114

1.4252

1.4327

1.4390

1.4465

1.4528

1.4666

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

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