Asian Session Forex Recap – Feb. 3, 2016

  • Australia’s building approvals up by 9.2% vs. 4.8% expected, 12.4% decline last month
  • Australia’s trade deficit deepens to 3.54B AUD vs. 2.45B AUD deficit expected
  • China’s Caixin services PMI: 52.4 vs. 50.5 expected, 50.2 previous
  • Japan’s consumer confidence down to 42.5 vs. 43.8 expected, 42.7 previous

High-yielding currencies got triple roundhouse-kicked by forex traders today, as they priced in lower oil prices, weak economic reports, and dovish central banker statements.

Major Events:

Mixed data from Australia – Data from the Land Down Under showed building approvals climbing by 9.2% after a 12.4% slump in November. China’s news also helped, as services PMI in the world’s second largest economy and Australia’s biggest trading partner hit a six-month high in December.

Unfortunately for Aussie bulls, forex traders had fixated on Australia’s bleak trade data. And why not? The trade deficit was worse than the estimated 3.5B AUD as it ballooned to a six-month high of 3.45B AUD in December. A closer look also reveals that exports had fallen by 4.7% while imports only fell by 1.5%.

Analysts don’t have far to look for the culprit. Prices of iron ore, Australia’s main export product, had fallen sharply over the past couple of months. Add to that the declining demand from China and speculations of further deterioration in commodity prices and we have a bad storm waiting to happen.

Dovish central banker statements – Major central bankers didn’t help with the overall risk sentiment either. For starters, RBNZ head honcho Graeme Wheeler took to the mic and hinted that further Kiwi depreciation is desirable and that the central bank may ease in case economic outlook worsens. Then, a few hours later, BOJ Governor Kuroda tried to up the ante by hinting that his gang can get creative in which and how many assets they will buy in order to reach their 2% inflation target. Duhn duhn duhn.

Overall risk aversion – Thanks to lingering concerns from the U.S. session and the catalysts stated above, traders were all over their sell buttons throughout the Asian session. Nikkei is trading 3.15% lower, Shanghai is down by 1.16%, Hang Seng is down 2.65%, and Australia’s ASX is down 2.33%.

Major Currency Movers:

AUD – The high-yielding Aussie gave up pips across the board with AUD/USD slipping by 35 pips (-0.50%), AUD/JPY falling by 75 pips (-0.87%), and AUD/NZD losing 15 pips (1.41%).

CAD – The oil-related Loonie received a couple more blows against its counterparts, thanks to further drops in oil prices.

USD/CAD popped up by 69 pips (+0.49%), CAD/JPY plummeted by 77 pips (-0.90%), and GBP/CAD zoomed 76 pips higher (+0.38%).

JPY – No surprise that the low-yielding yen was the apple of traders’ eyes during a risk-averse session. USD/JPY easily slid by 49 pips (-0.41%) while EUR/JPY fell by 56 pips (-0.43%) and GBP/JPY dropped by 77 pips (-0.45%).

Watch Out For:

  • 8:15 am GMT: Spanish services PMI (54.6 expected vs. 55.1 previous)
  • 8:45 am GMT: Italian services PMI (54.2 expected vs. 55.3 previous)
  • 8:50 am GMT: French final services PMI expected to remain at 50.6
  • 8:55 am GMT: German final services PMI expected to remain at 53.6
  • 9:30 am GMT: U.K. services PMI (expected to print at 55.4 vs. 55.5 last month)
  • 10:00 am GMT: Italian CPI (-0.1% expected, 0.0% previous)
  • 10:00 am GMT: Euro Zone retail sales to print 0.4% higher vs. 0.3% decline last month?

See more:

U.S. Session Forex Recap

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