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Yen Gains, US Dollar Edges Lower as Markets Digest Volatility

Yen Gains, US Dollar Edges Lower as Markets Digest Volatility

Ilya Spivak,

Talking Points:

  • US Dollar corrects lower as markets digest volatility after US election
  • Japanese Yen rebounded overnight after dropping to a four-month low
  • Headline risk still high amid cautious consolidation into the week-end

Currency markets settled into quiet consolidation in overnight trade, with the dust seemingly starting to settle after breakneck volatility triggered by the outcome of the US presidential election. The US Dollar corrected gently lower having posted a fourth consecutive gain in yesterday’s session. The Japanese Yen edged upward, retracing after hitting the lowest level in almost four months.

The greenback has been buoyed by speculation that the platform put forward by President-elect Trump will translate into higher inflation, beckoning faster Fed tightening. Breakeven rates – a measure of expected price growth baked into bond yields – shot up while the priced-in outlook for next year’s rate hike path materially steepened.

Looking ahead, a relatively quiet economic calendar in European and US hours offers a convenient backdrop for the markets to catch their breath into the weekend. S&P 500 futures – a benchmark for overall sentiment trends – are trading noticeably flat in late Asian trade, suggesting a bit of consolidation may be on offer.

With that said, the potential for significant gyrations remains considerable as investors try to fine-tune bets on the policy trajectory of the incoming US administration. An optimistic view driven by expectations of fiscal stimulus and deregulation has prevailed thus far but important uncertainties remain, particularly in the realm of trade policy. This makes for acute sensitivity to headline risk as details continue to trickle in.

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Asia Session

21:30NZDBusinessNZ Manufacturing PMI (OCT)55.2-57.5
21:45NZDFood Prices MoM (OCT)-0.8%--0.9%
23:50JPYLoans & Discounts Corp YoY (SEP)2.1%-2.1%
23:50JPYPPI MoM (OCT)-0.1%0.0%0.0%
23:50JPYPPI YoY (OCT)-2.7%-2.6%-3.2%
4:30JPYTertiary Industry Index MoM (SEP)-0.1%-0.2%0.0%

European Session

7:00EURGermany Wholesale Price Index MoM (OCT)-0.4%Low
7:00EURGermany Wholesale Price Index YoY (OCT)--0.3%Low
7:00EURGermany CPI MoM (OCT F)0.2%0.2%Medium
7:00EURGermany CPI YoY (OCT F)0.8%0.8%Medium
7:00EURGermany CPI - EU Harmonized MoM (OCT F)0.2%0.2%Medium
7:00EURGermany CPI - EU Harmonized YoY (OCT F)0.7%0.7%Medium
9:30GBPConstruction Output SA MoM (SEP)0.0%-1.5%Low
9:30GBPConstruction Output SA YoY (SEP)-0.4%0.2%Low

Critical Levels

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

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.