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US Dollar to Join Yen Rally as Deutsche Bank Sours Sentiment

US Dollar to Join Yen Rally as Deutsche Bank Sours Sentiment

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar likely to join Yen on the upside as Deutsche Bank sours sentiment
  • Aussie Dollar sinks as Asian, European shares follow Wall Street downward
  • US PCE, Eurozone CPI may pass unnoticed as risk aversion grips markets

The sentiment-linked Australian Dollar underperformed overnight while the anti-risk Japanese Yen traded higher as risk aversion triggered in late Wall Street trade carried over onto Asian bourses. The rout was triggered after Bloomberg reported that about 10 hedge funds cut back their exposure to beleaguered German lender Deutsche Bank.

Insolvency fears have plagued the firm recently after US regulators demanded it set aside $14 billion for penalties related to the conduct of its MBS business in the lead up to the 2008-9 financial crisis. German Chancellor Angela Merkel reportedly ruled out state assistance, according to a report from Focus magazine earlier in the week.

European shares are have taken up the risk-off lead in early trade and US stock futures are pointing sharply lower, hinting that sentiment may continue to sour into the week-end. The US Dollar may emerge as another beneficiary alongside the Yen as haven demand sends capital flooding into the benchmark currency. Gold has also emerged as a beneficiary.

US PCE inflation figures – the Fed’s favored price growth benchmark – headline the economic calendar. The core year-on-year rate is expected to tick up to 1.7 percent, the highest in at least six months. While an upbeat result might have stirred rate hike speculation, this seems unlikely as risk appetite sours across financial markets. An slightly higher flash Eurozone CPI reading may also pass with little fanfare.

Losing money trading in the FX market?This might be why.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Building Permits (MoM) (AUG)

-1.0%

-

-8.1%

23:01

GBP

GfK Consumer Confidence (SEP)

-1

-5

-7

23:01

GBP

Lloyds Business Barometer (SEP)

24

-

16

23:30

JPY

Jobless Rate (AUG)

3.1%

3.0%

3.0%

23:30

JPY

Job-To-Applicant Ratio (AUG)

1.37

1.37

1.37

23:30

JPY

Overall Household Spending (YoY) (AUG)

-4.6%

-2.1%

-0.5%

23:30

JPY

Natl CPI (YoY) (AUG)

-0.5%

-0.5%

-0.4%

23:30

JPY

Natl CPI Ex Fresh Food (YoY) (AUG)

-0.5%

-0.4%

-0.5%

23:30

JPY

Natl CPI Ex Food, Energy (YoY) (AUG)

0.2%

0.2%

0.3%

23:30

JPY

Tokyo CPI (YoY) (SEP)

-0.5%

-0.5%

-0.5%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (SEP)

-0.5%

-0.4%

-0.4%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (SEP)

-0.1%

0.1%

0.1%

23:50

JPY

BOJ Summary of Opinions at Sept.20-21 Meeting

-

-

-

23:50

JPY

Industrial Production (MoM) (AUG P)

1.5%

0.5%

-0.4%

23:50

JPY

Industrial Production (YoY) (AUG P)

4.6%

3.4%

-4.2%

00:00

NZD

ANZ Activity Outlook (SEP)

42.4

-

33.7

00:00

NZD

ANZ Business Confidence (SEP)

27.9

-

15.5

01:00

AUD

HIA New Home Sales (MoM) (AUG)

6.1%

-

-9.7%

01:30

AUD

Private Sector Credit (MoM) (AUG)

0.4%

0.5%

0.4%

01:30

AUD

Private Sector Credit (YoY) (AUG)

5.8%

5.9%

6.0%

01:45

CNY

Caixin China PMI Mfg (SEP)

50.1

50.1

50.0

02:00

NZD

M3 Money Supply (YoY) (AUG)

5.3%

-

6.3%

04:00

JPY

Vehicle Production (YoY) (AUG)

8.8%

-

-4.1%

05:00

JPY

Housing Starts (YoY) (AUG)

2.5%

7.1%

8.9%

05:00

JPY

Annualized Housing Starts (AUG)

0.956m

0.999m

1.005m

05:00

JPY

Construction Orders (YoY) (AUG)

13.8%

-

-10.9%

05:00

JPY

Natl CPI Ex Fresh Food, Energy (YoY) (AUG)

0.4%

0.4%

0.5%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

06:00

EUR

German Retail Sales (MoM) (AUG)

-0.4% (A)

0.5%

Medium

06:00

EUR

German Retail Sales (YoY) (AUG)

3.7% (A)

-1.5%

Medium

06:00

EUR

National House Px (MoM) (SEP)

0.3%(A)

0.6%

Medium

06:00

EUR

National House Px (YoY) (SEP)

5.3% (A)

5.6%

Medium

07:00

CHF

KOF Leading Indicator (SEP)

101.3 (A)

99.7

Low

08:30

GBP

GDP (QoQ) (2Q F)

0.6%

0.6%

Medium

08:30

GBP

GDP (YoY) (2Q F)

2.2%

2.2%

Medium

08:30

GBP

Current Account Balance (2Q)

-30.6b

-32.6b

Low

08:30

GBP

Index of Services (MoM) (JUL)

0.1%

0.2%

Low

08:30

GBP

Index of Services (3M/3M) (JUL)

0.3%

0.5%

Low

08:30

GBP

Total Business Investment (QoQ) (2Q F)

0.5%

0.5%

Low

08:30

GBP

Total Business Investment (YoY) (2Q F)

-0.8%

-0.8%

Low

09:00

EUR

Eurozone Unemployment Rate (AUG)

10.0%

10.1%

Medium

09:00

EUR

Eurozone CPI Estimate (YoY) (SEP)

0.4%

-

High

09:00

EUR

Eurozone CPI Core (YoY) (SEP A)

0.9%

0.8%

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1117

1.1170

1.1196

1.1223

1.1249

1.1276

1.1329

GBP/USD

1.2786

1.2890

1.2929

1.2994

1.3033

1.3098

1.3202

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

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