- Yen drops, Aussie and Kiwi Dollars rise as risk appetite firms
- Euro leads European FX higher on French election optimism
- BOE’s Carney may have muted impact on the British Pound
The Japanese Yen underperformed as investors’ mood brightened in Asian trade, with most regional shares rising and the standby anti-risk currency dutifully heading the other way. The US Dollar likewise fell, erasing the previous session’s recovery.
Curiously, the greenback sank even as firming sentiment bid up Treasury yields, which had been a supportive dynamic just yesterday. Perhaps traders have concluded that the coast is clear enough to reach further out along the risk, particularly as first-quarter slowdown fears undercut the case for Fed tightening.
Indeed, the Australian and New Zealand Dollars enjoyed healthy gains. European FX proved most impressive however, with the Euro leading the way higher. The cheer may owe to a fresh Harris poll showing rising support for Emmanuel Macron, the markets’ preferred candidate in the French presidential election.
From here, a speech from Bank of England Mark Carney seems unlikely to offer much beyond the familiar and may pass quietly. The central bank maintains that it will look through recent inflation gains and stands ready to make an already accommodative environment more so if Brexit-related shocks demand it.
Sentiment may ultimately prove to be the most potent driver of price action once again. Most European bourses are enjoying gains and S&P 500 futures have picked up momentum on the upside, hinting at more of the same as Wall Street comes online.
Most obviously, that spells more trouble for the Yen. Commodity bloc currencies ought to remain well-supported as well. Price action linked to French election optimism may be fickle however. Candidates are still uncomfortably clustered before the first round vote this weekend, making for an uncertain landscape.
Have a question about the currency markets? Join a Trading Q&A webinar and ask it live!
** All times listed in GMT. See the full DailyFX economic calendar here.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To receive Ilya's analysis directly via email, please SIGN UP HERE
Contact and follow Ilya on Twitter: @IlyaSpivak