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Japanese Yen Losses May Deepen as US Data Feeds Risk Appetite

Japanese Yen Losses May Deepen as US Data Feeds Risk Appetite

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound gains with stocks as BOE signals stimulus boost in August
  • Upbeat Chinese data helps lift sentiment, Aussie Dollar gains as Yen falls
  • US retail sales, consumer confidence numbers may bolster risk appetite

The British Pound outperformed overnight as Asian markets took their turn to react to yesterday’s Bank of England rate decision. Governor Mark Carney and company opted against an interest rate cut projected in consensus forecasts but hinted that easing would arrive in August instead.

It seems to have been this quasi-promise of stimulus on the horizon rather than the absence of a cut that buoyed Sterling. Indeed, the currency rose with yields only briefly after the BOE made its announcement, with the move losing steam and reversing after just an hour.

Fast-forwarding to Friday’s Asian session, the UK unit is rising alongside regional share prices and the sentiment-geared Australian Dollar while the anti-risk Japanese Yen declines. As noted yesterday, easing can be seen as supportive GBP-denominated assets if it aids UK financial stability in a post-Brexit world.

Needless to say, anything that appears to dampen UK instability fears is also helpful to overall risk sentiment in the current environment. Upbeat economic data out of China seems to have helped as well this time around. Retail sales, industrial production and second-quarter GDP figures all topped forecasts.

Carry-over momentum from yesterday’s price action appeared to be in play for the New Zealand Dollar. Prices continued to fall alongside front-end bond yields after the RBNZ appeared to set the stage for a rate cut next month.

June’s US Retail Sales and July’s University of Michigan Consumer Confidence data are in focus ahead. Receipts growth is seen slowing (0.1% vs. 0.5% prior) while sentiment holds unchanged. US news-flow has increasingly outperformed relative to forecasts since mid-May, opening the door for an upside surprise.

An upbeat result may bolster global growth bets, adding to the appeal of higher-yielding currencies while further punishing the Yen. US CPI is also on tap, but the figures’ limited implications for recently outward-focused Fed policy bets may limit their market-moving potential.

Asia Session

GMTCCYEVENTACTEXPPREV
21:30NZDREINZ House Sales (YoY) (JUN)6.0%-13.6%
00:20USDFed's Kaplan Speaks in St. Louis ---
02:00CNYIndustrial Production (YoY) (JUN)6.2%5.9%6.0%
02:00CNYIndustrial Production YTD (YoY) (JUN)6.0%5.9%5.9%
02:00CNYRetail Sales (YoY) (JUN)10.6%9.9%10.0%
02:00CNYRetail Sales YTD (YoY) (JUN)10.3%10.2%10.2%
02:00CNYFixed Assets Ex Rural YTD (YoY) (JUN)9.0%9.4%9.6%
02:00CNYGDP YTD (YoY) (2Q)6.7%6.6%6.7%
02:00CNYGDP SA (QoQ) (2Q)1.8%1.6%1.2%
02:00CNYGDP (YoY) (2Q)6.7%6.6%6.7%
02:02CNYNew Yuan Loans (CNY) (JUN)1380.0b1000.0b985.5b
02:02CNYAggregate Financing (CNY) (JUN)1630.0b1100.0b659.9b
02:02CNYMoney Supply M2 (YoY) (JUN)11.8%11.4%11.8%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
06:00EUREU27 New Car Registrations (JUN)6.9% (A)16.0%Low
08:30GBPConstruction Output (MoM) (MAY)-1.2%2.5%Low
08:30GBPConstruction Output (YoY) (MAY)-3.5%-3.7%Low
09:00EUREurozone Trade Balance SA (MAY)25.0b28.0bLow
09:00EUREurozone Trade Balance NSA (MAY)25.0b27.5bLow
09:00EUREurozone CPI (MoM) (JUN)0.2%0.4%Medium
09:00EUREurozone CPI (YoY) (JUN F) 0.1%0.1%Medium
09:00EUREurozone CPI Core (YoY) (JUN F) 0.9%0.9%Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.09701.10471.10841.11241.11611.12011.1278
GBPUSD1.25701.29391.31411.33081.35101.36771.4046

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

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