Asian Session Forex Recap – Nov. 26, 2015

  • Australian capital expenditure q/q: -9.2% vs. -2.9% expected, -4.0% previous
  • Risk appetite returns, Nikkei 225 closed 0.49% higher

Not much on the docket for today’s Asian session, so forex price action for most currency pairs were relatively subdued. The Aussie and the Kiwi were clearly on the move, however.

Major Events:

Risk appetite returns – Security jitters over Tukey’s downing of a Russian jet was finally fading, according to some analyts, allowing risk appetite to return to the Asian markets, as evidenced by the performance of Asian equities. The Hang Seng was up by 0.84% to 22,686.00 and the Shanghai composite was up by 0.25% to 3,657.07. The Nikkei 225, meanwhile, closed 0.49% higher at 19,944.41.

Australian capital expenditure – Capital expenditure, otherwise known as investment spending, by Australian companies in Q3 slumped by 9.2%, which is significantly worse then the expected decline of 2.9%. Even worse, the previous reading was slightly downgraded from -4.0% to -4.4%. Worse still, investment spending contracted by a 20% on an annualized basis. Ouch!

According to the details of the report, capital expenditure on the mining sector fell by 10.4% (-11.7% previous), but the manufacturing sector saw an increase of 6.9% (-4.0% previous). Meanwhile, other selected industries saw a 10.0% drop after advancing by 4.3% previously, with most of the drop being attributed to the 9.2% decline in services.

Major Currency Movers:

AUD – The Aussie dropped hard when the worse-than expected reading for Australian capital expenditure came out. Aside from the knee-jerk reaction to the actual reading, forex traders probably thought that the dismal decline in investment spending would be a drag to GDP growth. Furthermore, it went against the RBA’s forecast in their most recent meeting minutes that improving domestic demand in Australia, “together with the increased competitiveness from the lower exchange rate, were expected to lead to a pick-up in non-mining business investment.”

True, investment in the manufacturing sector increased, but the same can’t be said for other non-mining industries, especially services. Anyhow, there was little follow-through from sellers after the initial drop, probably because the high-yielding Aussie was getting some buyers due to the return of risk appetite during the forex session.

AUD/USD was down by 18 pips (-0.25%) to 0.7235 with 0.7217 as session low, AUD/CHF was down by 16 pips (-0.22%) to 0.7395 with 0.7377 as session low, AUD/JPY was down by 30 pips (-0.34%) to 88.68 with 88.51 as session low

NZD – Despite a lack of major catalysts, the Kiwi was showing strength across the board for the entire duration of the forex session. The Kiwi’s strength was possibilly due to Asian forex traders pricing-in the smaller-than-expected hole in New Zealand’s trade balance from earlier. Although the risk-on sentiment was also a favorable environment for the higher-yielding Kiwi to attract some buyers.

NZD/USD was up by 16 pips (+0.25%) to 0.6591, NZD/CAD was up by 20 pips (+0.24%) to 0.8763, NZD/CHF was up by 18 pips (+0.27%) to 0.6736

Watch Out For:

  • 8:45 am GMT Swiss industrial production (-2.5% previous)
  • 9:00 am GMT Euro Zone M3 money supply y/y (4.9% expected, 4.9% previous)
  • 12:00 am GMT German GfK consumer sentiment (9.2 expected, 9.4 previous)

See more:

U.S. Session Forex Recap

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