Asian Session Recap – Aug. 8, 2014

  • Obama allows airstrikes on militants in Iraq
  • Japanese current account surplus narrowed from 0.38T JPY to 0.13T JPY
  • Japanese bank lending up by annualized 2.2% in July
  • Nikkei down by 2.98% for the day
  • BOJ kept monetary policy unchanged as expected
  • Australian home loans up by 0.2% vs 0.7% estimate
  • Chinese trade surplus up from 31.6B USD to 47.3B USD

A fresh wave of risk aversion hit the markets in today’s Asian trading session after U.S. President Obama gave a speech authorizing airstrikes on militants in Iraq. This added to the prevailing geopolitical tensions, as the prospect of further conflict weighed on higher-yielding currencies and equities.

EUR/USD slumped to a low of 1.3324 after the announcement while GBP/USD resumed its decline close to the 1.6800 handle. USD/JPY fell to a low of 101.59 before recovering to the 101.80 levels while EUR/JPY is struggling to hold on to the 136.00 handle.

The comdolls drew a bit of support from stronger than expected Chinese trade balance data, as the surplus grew from 31.6 billion USD to 47.3 billion USD in July instead of falling to the estimated 26.0 billion USD figure. Components of the report revealed that imports slumped during the month while exports surged by 14.5% on a year-over-year basis.

AUD/USD is hovering around the .9250 levels and NZD/USD is also moving sideways, just below the .8450 mark. AUD/JPY, on the other hand, drifted lower as it is currently testing support at the 94.00 level. Australian home loans showed a weaker than expected 0.2% gain versus the estimated 0.7% increase, suggesting that housing sector activity could be slowing down.

As expected, the BOJ kept monetary policy unchanged for the time being, despite the recent set of bleak reports from Japan. Policymakers also kept their assessment unchanged, mentioning that the economic recovery is continuing moderately. However, the statement indicated that the BOJ has lowered its expectations for exports and industrial output.

Data due from the euro zone today includes the German trade balance and French industrial production numbers, both of which are slated to show improvements. Should the actual results fall short of expectations though, the euro might be in for more weakness in the next few hours. Also coming up is the U.K. trade balance, which might show a smaller deficit of 8.9 billion GBP from the previous 9.2 billion GBP. See also:

U.S. Session Recap

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