US Dollar May Extend Gains on Hawkish Fed Commentary

2016-05-19 05:09:00 Ilya Spivak, Head Strategist, APAC

Talking Points:

Yen gains, commodity-bloc FX drops amid risk aversion in Asian trade
Australian Dollar underperforms after disappointing labor-market data
US Dollar may extend advance as Fed-speak boosts June rate hike bets

The anti-risk Japanese Yen outperformed while sentiment-linked commodity bloc currencies faced selling pressure as risk aversion swept financial markets in Asian trading hours. The dour mood appeared to reflect follow-on momentum after a drop Wall Street triggered by hawkish rhetoric within minutes from April’s FOMC meeting (as expected). The Australian Dollar suffered outsized losses in the wake of disappointing labor-market figures.

Looking ahead, a lull in high-profile event risk offers markets space for consolidation as investors digest yesterday’s volatility surge. Another round of Fed-speak may break the quiet however as Fed policy speculation heats up anew. Comments from Fed Vice Chair Stanley Fischer and Bill Dudley, the President of the central bank’s New York branch, are due to cross the wires.

Fischer and Dudley represent the central core of the rate-setting FOMC committee, suggesting their views are likely to match the majority consensus. If their tone matches the hawkish lean on display in the Minutes document, the US Dollar is likely to continue higher and another round of risk aversion may strike the broader markets. As it stands, the priced-in probability of a rate increase in June has surged to 34 percent from just 4 percent at the start of the week.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:00	NZD	ANZ Job Advertisements (MoM) (APR)	1.7%	-	3.1%
23:50	JPY	Housing Loans (YoY) (1Q)	1.9%	-	2.2%
23:50	JPY	Machine Orders (MoM) (MAR)	5.5%	-2.0%	-9.2%
23:50	JPY	Machine Orders (YoY) (MAR)	3.2%	0.8%	-0.7%
01:00	NZD	ANZ Consumer Confidence Index (MAY)	116.2	-	120.0
01:00	NZD	ANZ Consumer Confidence (MoM) (MAY)	-3.2%	-	1.7%
01:30	AUD	Employment Change (APR)	-10.8k	12.0k	25.7k
01:30	AUD	Unemployment Rate (APR)	5.7%	5.8%	5.7%
01:30	AUD	Full Time Employment Change (APR)	-9.3k	-	-10.0k
01:30	AUD	Part Time Employment Change (APR)	20.2k	-	35.7k
01:30	AUD	Participation Rate (APR)	64.8	64.9%	64.9%
01:30	AUD	RBA FX Transactions Government (APR)	-991m	-	-978m
01:30	AUD	RBA FX Transactions Market (APR)	946m	-	954m
01:30	AUD	RBA FX Transactions Other (APR)	68m	-	44m
01:45	CNY	MNI Business Indicator (MAY)	50.0		50.5
04:30	JPY	All Industry Activity Index (MoM) (MAR)	-	0.7%	-1.2%
06:00	JPY	Machine Tool Orders (YoY) (APR F)	-	-	-26.4%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
-	-	G7 FinMins, Central Bank Governors Meet	-	-	Medium
08:00	EUR	ECB Current Account SA (MAR)	-	19.0b	Low
08:00	EUR	Current Account NSA (MAR)	-	11.1b	Low
08:30	GBP	Retail Sales Ex Auto Fuel (MoM) (APR)	0.6%	-1.6%	Medium
08:30	GBP	Retail Sales Ex Auto Fuel (YoY) (APR)	2.0%	1.8%	Medium
08:30	GBP	Retail Sales Inc Auto Fuel (MoM) (APR)	0.6%	-1.3%	Medium
08:30	GBP	Retail Sales Inc Auto Fuel (YoY) (APR)	2.5%	2.7%	Medium
09:00	EUR	Eurozone Construction Output (MoM) (MAR)	-	-1.1%	Low
09:00	EUR	Eurozone Construction Output (YoY) (MAR)	-	2.5%	Low
11:30	EUR	ECB Account of April Policy Meeting	-	-	Medium