Talking Points:

  • Yen, commodity bloc FX correct after yesterday’s risk appetite recovery
  • S&P 500 futures hint risk-off trade might resume but caution warranted
  • Sentiment may firm if Fed officials hint market woes to delay rate hikes

The sentiment-linked Australian, Canadian and New Zealand Dollars turned lower in Asia Pacific trade while the Japanese Yen advanced. The move appeared corrective, marking retracements of earlier price action seen against a backdrop of recovering risk appetite on Wall Street. The Kiwi led the way lower having scored outsized gains courtesy of better-than-expected labor market data published late yesterday.

From here, S&P 500 futures trading sharply lower, hinting that risk-off market dynamics may return when Wall Street comes back online. It seems wise not to extrapolate overnight moves too much however, no matter how sizable the swings appear. A drop of over 0.6 percent might be telling on a normal day, but following a gain of 1.74 percent yesterday it may be little more than a correction.

A quiet offering of European and US economic data may put comments from Fed officials in the spotlight. Presidents of the US central bank’s Dallas, New York, Chicago and San Francisco branches are due to speak. If theyseem to suggest that financial market turmoil might slow the interest rate hike cycle, the US Dollar may fall alongside anti-risk FX (Yen, Swiss Franc) while commodity bloc currencies rise.

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Asia Pacific Trading Session

US Dollar May Fall if Fed Speakers Hint Market Woes to Slow Hikes

European Trading Session

US Dollar May Fall if Fed Speakers Hint Market Woes to Slow Hikes

** All times listed in GMT. See the full DailyFX economic calendar here.

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

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