Australian Dollar Pullback May Continue as Risk Appetite Cools

2016-06-10 03:24:00 Ilya Spivak, Head Strategist, APAC

Talking Points:

Aussie Dollar underperforms amid risk aversion in overnight trade
Euro, US Dollar unlikely to find direction in CPI and UofM reports
Sentiment trends to remain in focus, futures hint at risk-off mood

The Australian Dollar underperformed in otherwise quiet overnight trade, with the sentiment-sensitive currency falling alongside share prices. The MSCI Asia Pacific equity index fell for a second consecutive day in a move that may reflect pre-positioning ahead of next week’s event risk.

The regional benchmark hit a two-month high mid-week. The absence of high-profile items on the docket may have inspired a round of precautionary profit-taking as investors rebalance exposure toward a more risk-neutral setting ahead of next week’s news flow, headlined by the FOMC policy announcement.

Looking ahead, the final revision of May’s German CPI figures seems unlikely to generate a significant response from the Euro considering the outcome’s limited implications for near-term ECB policy trends. A downtick on June’s University of Michigan gauge of US consumer confidence may likewise pass with little fanfare, with traders probably unwilling to commit to a directional bias on the US Dollar for now.

This leaves sentiment trends at the forefront. European and US stock index futures are pointing cautiously lower, hinting the risk-off bias may carry through in the final hours of the trading week. “Brexit”-related headline risk remains a wildcard as the fateful referendum looms ever-closer.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Card Spending Retail (MoM) (MAY)	-0.3%	0.5%	0.8%
22:45	NZD	Card Spending Total (MoM) (MAY)	-0.6%	-	1.3%
23:50	JPY	PPI (MoM) (MAY)	0.2%	0.1%	-0.4%
23:50	JPY	PPI (YoY) (MAY)	-4.2%	-4.2%	-4.2%
04:30	JPY	Tertiary Industry Index (MoM) (APR)		0.6%	-0.7%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
06:00	EUR	German Wholesale Price Index (MoM) (MAY)	-	0.3%	Low
06:00	EUR	German Wholesale Price Index (YoY) (MAY)	-	-2.7%	Low
06:00	EUR	German CPI (MoM) (MAY F)	0.3%	0.3%	Medium
06:00	EUR	German CPI (YoY) (MAY F)	0.1%	0.1%	Medium
07:00	EUR	ECB's Weidmann Speaks in Eltville am Rhine	-	-	Low
08:30	GBP	Construction Output SA (MoM) (APR)	1.4%	-3.6%	Low
08:30	GBP	Construction Output SA (YoY) (APR)	-4.8%	-4.5%	Low
08:30	GBP	BoE/TNS Inflation Next 12 Mths (MAY)	-	1.8%	Low
12:15	EUR	ECB's Constancio, Lane Speak	-	-	Low