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Asia AM Digest: GBP Down and JPY Up Ahead of Illiquid Conditions

Asia AM Digest: GBP Down and JPY Up Ahead of Illiquid Conditions

Research, Research Team


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The British Pound was broadly speaking the worst performing major on Thursday. Its descent though was unaccompanied with a major catalyst. However, Sterling did decline with front-end local government bond yields. This hints at ebbing hawkish Bank of England monetary policy expectations. In addition, traders might may have taken some profits ahead of the holiday weekend. GBP/USD has spent most of March rising.

Meanwhile the anti-risk Japanese Yen was one of the best performing currencies. The Yen was initially boosted by declines in the Nikkei 225 during the first half of the day. Then, it held its ground even though stocks rose during the US session. There was a Japanese 2-year bond auction where average yields rose to -0.138% from -0.160%. That might speak to heightened appeal of JPY-denominated assets.

The Euro underperformed as well. German CPI for the March preliminary estimate missed expectations coming in at just 1.6% y/y versus 1.7% expected. Given the incoming Good Friday holiday, expect illiquid trading conditions with stock markets closed in places such as Australia, Canada, New Zealand, UK and the US.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

IG Client Sentiment Index Chart of the Day: AUD/USD

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 55.2% of AUD/USD traders are net-long with the ratio of traders long to short at 1.23 to 1. In fact, traders have remained net-long since Mar 22 when AUD/USD traded near 0.77738; price has moved 1.4% lower since then. The number of traders net-long is 8.5% higher than yesterday and 17.4% higher from last week, while the number of traders net-short is 0.7% lower than yesterday and 3.4% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias.

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