Asian Session Forex Recap – Jan. 22, 2016

  • Japan flash manufacturing PMI: 52.4 vs. 42.8 expected, 52.6 last month
  • More BOJ easing in the works?

A mixed trading session for the major currencies, as forex traders extended yesterday’s themes and priced in upcoming economic releases.

Major Events:

More easing from the BOJ? – As if Draghi’s dovishness wasn’t enough to whet the bulls’ appetites, forex traders are now chomping at the idea of more easing from the Bank of Japan (BOJ). Citing a senior BOJ official, the Nikkei reported that the central bank is considering more easing measures to combat weaker inflation outlook, falling stock prices, and the yen’s recent strength.

Equities traders were all over the idea, as cheap money usually encourages economic activity. And with Asian session traders already pricing in Draghi’s dovish speech and a rally in commodity prices, it was easy to foster a risk-friendly vibe in the markets.

Shanghai closed for lunch break with Nikkei trading 4.22% higher, followed by Hang Seng (+1.41%) and Australia’s ASX index (+1.01%).

Oil stages more mini rallies – Oil prices continued to stage small rallies despite the continued release of reports supporting an oversupply scenario in the markets. Brent crude rose by 1.68% to $29.74 per barrel throughout the session while West Texas Intermediate (WTI) gained 1.19% to $29.88 after hitting a session high of $29.99.

Major Currency Movers:

USD – Strangely enough, it was the low-yielding Greenback that posted gains against most of its counterparts. One possible reason is that reaction to the BOJ’s news was concentrated on USD/JPY’s price action. Another is positioning or profit-taking ahead of today’s data dump from the euro zone and the U.K.

USD/JPY is breaching the 118.00 major handle with a 43-pip gain (+0.37%) and USD/CHF is up 18 pips (+0.18%). Meanwhile, EUR/USD dipped by 45 pips (-0.41%) and GBP/USD inched 11 pips lower (-0.08%).

EUR – The common currency lost more pips across the board, thanks to Draghi’s hints of further easing. A quick look at the schedule below also tells us that traders might be jittery over holding euros when the PMI reports start to come in.

EUR/JPY fell from a session high of 128.19 to 127.75 while EUR/GBP saw a 25-pip decline (-0.33%). Ditto for EUR/CHF, which slid by 24 pips (-0.22%) throughout the session.

Watch Out For:

  • 7:45 am GMT: ECB President Mario Draghi to give a speech in Davos. Will we hear more hints of further ECB easing?
  • 8:00 am GMT: French flash manufacturing PMI: 51.6 expected vs. 51.4 previous
  • 8:00 am GMT: French flash services PMI: 50.4 expected vs. 49.8 previous
  • 8:00 am GMT: French flash services PMI: 50.4 expected vs. 49.8 previous
  • 8:30 am GMT: German flash services PMI: 55.6 expected vs. 56.0 previous
  • 9:00 am GMT: Euro Zone flash manufacturing PMI: 53.0 expected vs. 53.2 previous
  • 9:00 am GMT: Euro Zone flash manufacturing PMI: 53.0 expected vs. 53.2 previous
  • 9:30 am GMT: U.K. retail sales to print a decline in December?
  • 9:30 am GMT: U.K. government borrowing to slip from 13.6B GBP to 10.1B GBP?

See more:

U.S. Session Forex Recap

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