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Yen Falls as Stocks Rise, US Dollar May Decline as FOMC Looms

Yen Falls as Stocks Rise, US Dollar May Decline as FOMC Looms

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Yen drops as ECB stimulus boost sends global shares upward
  • Lull in key event risk may make for quiet end to trading week
  • US Dollar may decline in pre-positioning for FOMC meeting

The Japanese Yen underperformed in otherwise quiet overnight trade as most Asian stocks advanced, putting pressure on the perennial anti-risk currency. Regional shares followed Wall Street higher after the ECB expanded its monetary stimulus effort.

Mario Draghi and company extended QE asset purchases to run through 2017 from the previous end date at the end of March. The size of monthly asset purchases was lowered from €80 to €60 billion in the nine months from April through December.

The markets’ baseline expectation ahead of the ECB policy announcement favored a 6-month extension that kept the current pace of uptake unchanged. Compared to this, the central bank’s new scheme amounts to a net €60bnin additional accommodation.

From here, a quiet data docket in European and US trading hours argues for congestion as markets digest recent volatility. A US Dollar pullback may be in the cards amid pre-positioning for next week’s FOMC announcement as traders weigh the possibility that the Fed’s 2017 outlook will be more timid than their own.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:45NZDCard Spending Retail (MoM) (NOV)-0.1%0.40%0.5%
21:45NZDCard Spending Total (MoM) (NOV)-0.3%-0.6%
23:50JPYBSI Large All Industry (QoQ) (4Q)3-1.9
23:50JPYBSI Large Manufacturing (QoQ) (4Q)7.5-2.9
23:50JPYMoney Stock M2 (YoY) (NOV)4.0%3.7%3.7%
23:50JPYMoney Stock M3 (YoY) (NOV)3.4%3.2%3.1%
0:30AUDHome Loans (MoM) (OCT)-0.8%-1.0%1.5%
0:30AUDInvestment Lending (OCT)0.7%-5.1%
0:30AUDOwner-Occupier Loan Value (MoM) (OCT)-0.8%-0.8%
1:30CNYCPI (YoY) (NOV)2.3%2.2%2.1%
1:30CNYPPI (YoY) (NOV)3.3%2.3%1.2%

European Session

GMTCCYEVENTEXPPREVIMPACT
6:45CHFUnemployment Rate (NOV)3.3%3.2%Medium
6:45CHFUnemployment Rate SA (NOV)3.3%3.3%Medium
7:00EURGerman Trade Balance (OCT)22.0b24.2bMedium
7:00EURGerman Current Account Balance (OCT)22.0b24.2bMedium
7:00EURGerman Exports SA (MoM) (OCT)0.9%-1.2%Low
7:00EURGerman Imports SA (MoM) (OCT)1.1%-0.7%Low
7:00EURGerman Labor Costs WDA (YoY) (3Q)-1.8%Low
7:00EURGerman Labor Costs SA (QoQ) (3Q)-0.2%Low
7:45EURFrench Budget Balance YTD (OCT)--83.0bLow
7:45EURFrench Industrial Production (MoM) (OCT)0.6%-1.1%Low
7:45EURFrench Industrial Production (YoY) (OCT)-0.6%-1.1%Low
7:45EURFrench Manufacturing Production (MoM) (OCT)0.7%-1.1%Low
7:45EURFrench Manufacturing Production (YoY) (OCT)0.1%-0.9%Low
9:30GBPVisible Trade Balance (£/Mn) (OCT)-11800-12698Medium
9:30GBPTrade Balance Non EU (£/Mn) (OCT)-3450-3969Medium
9:30GBPTrade Balance (£/Mn) (OCT)-4300-5221Medium
9:30GBPConstruction Output SA (MoM) (OCT)0.2%0.3%Low
9:30GBPConstruction Output SA (YoY) (OCT)-0.1%0.2%Low
9:30GBPBoE/TNS Inflation Next 12 Mths (NOV)-2.2%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.01441.04201.05171.06961.07931.09721.1248
GBP/USD1.23011.24571.25221.26131.26781.27691.2925

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

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