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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,

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

21:45NZDBuilding Permits (MoM) (AUG)-1.0%--8.1%
23:01GBPGfK Consumer Confidence (SEP)-1-5-7
23:01GBPLloyds Business Barometer (SEP)24-16
23:30JPYJobless Rate (AUG)3.1%3.0%3.0%
23:30JPYJob-To-Applicant Ratio (AUG)1.371.371.37
23:30JPYOverall Household Spending (YoY) (AUG)-4.6%-2.1%-0.5%
23:30JPYNatl CPI (YoY) (AUG)-0.5%-0.5%-0.4%
23:30JPYNatl CPI Ex Fresh Food (YoY) (AUG)-0.5%-0.4%-0.5%
23:30JPYNatl CPI Ex Food, Energy (YoY) (AUG)0.2%0.2%0.3%
23:30JPYTokyo CPI (YoY) (SEP)-0.5%-0.5%-0.5%
23:30JPYTokyo CPI Ex-Fresh Food (YoY) (SEP)-0.5%-0.4%-0.4%
23:30JPYTokyo CPI Ex Food, Energy (YoY) (SEP)-0.1%0.1%0.1%
23:50JPYBOJ Summary of Opinions at Sept.20-21 Meeting ---
23:50JPYIndustrial Production (MoM) (AUG P)1.5%0.5%-0.4%
23:50JPYIndustrial Production (YoY) (AUG P)4.6%3.4%-4.2%
00:00NZDANZ Activity Outlook (SEP)42.4-33.7
00:00NZDANZ Business Confidence (SEP)27.9-15.5
01:00AUDHIA New Home Sales (MoM) (AUG)6.1%--9.7%
01:30AUDPrivate Sector Credit (MoM) (AUG)0.4%0.5%0.4%
01:30AUDPrivate Sector Credit (YoY) (AUG)5.8%5.9%6.0%
01:45CNYCaixin China PMI Mfg (SEP)
02:00NZDM3 Money Supply (YoY) (AUG)5.3%-6.3%
04:00JPYVehicle Production (YoY) (AUG)8.8%--4.1%
05:00JPYHousing Starts (YoY) (AUG)2.5%7.1%8.9%
05:00JPYAnnualized Housing Starts (AUG)0.956m0.999m1.005m
05:00JPYConstruction Orders (YoY) (AUG)13.8%--10.9%
05:00JPYNatl CPI Ex Fresh Food, Energy (YoY) (AUG)0.4%0.4%0.5%

European Session

06:00EURGerman Retail Sales (MoM) (AUG)-0.4% (A)0.5%Medium
06:00EURGerman Retail Sales (YoY) (AUG)3.7% (A)-1.5%Medium
06:00EURNational House Px (MoM) (SEP)0.3%(A)0.6%Medium
06:00EURNational House Px (YoY) (SEP)5.3% (A)5.6%Medium
07:00CHFKOF Leading Indicator (SEP)101.3 (A)99.7Low
08:30GBPGDP (QoQ) (2Q F)0.6%0.6%Medium
08:30GBPGDP (YoY) (2Q F)2.2%2.2%Medium
08:30GBPCurrent Account Balance (2Q)-30.6b-32.6bLow
08:30GBPIndex of Services (MoM) (JUL)0.1%0.2%Low
08:30GBPIndex of Services (3M/3M) (JUL)0.3%0.5%Low
08:30GBPTotal Business Investment (QoQ) (2Q F)0.5%0.5%Low
08:30GBPTotal Business Investment (YoY) (2Q F)-0.8%-0.8%Low
09:00EUREurozone Unemployment Rate (AUG)10.0%10.1%Medium
09:00EUREurozone CPI Estimate (YoY) (SEP)0.4%-High
09:00EUREurozone CPI Core (YoY) (SEP A)0.9%0.8%High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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