Asian Session Forex Recap – Mar. 1, 2016

  • RBA holds interest rates steady at 2.00%
  • Australia’s building approvals down by 7.5% vs. 2.9% decline expected, 8.6% uptick last month
  • Australia’s current account shows 21.1B AUD deficit vs. 19.8B deficit expected, 18.8B deficit previous
  • China’s manufacturing PMI down to 49.0 vs. 49.4 expected and previous
  • China’s non-manufacturing PMI drops from 53.5 to 52.7
  • China’s Caixin manufacturing PMI down to 48.0 vs. 48.4 expected and previous
  • Japan’s manufacturing PMI revised from 50.2 to 50.1
  • Australia’s annualized commodity prices down by 21.6% vs. 2.8% decline last month

Forex price action was a mixed bag of nuts, as Asian session traders priced in economic reports from Japan, Australia, and China.

Major Events:

Early yen buying – The yen was bought heavily even before Tokyo traders punched in for the day, likely due to disappointing Australian data and expectations of weak PMI reports from China. Seems like traders had good reason to be risk averse, too, as most of the economic reports printed during the Asian session (including China’s PMIs) missed investor expectations.

China’s PMIs miss estimates – The world’s second largest economy printed weaker-than-expected manufacturing and services PMIs today, which is not the best thing to hear coming at the heels of a PBoC RRR cut just yesterday.

China’s manufacturing PMI dropped deeper into contractionary territory with a reading of 49.0 while the official services PMI also slipped from 53.5 to 52.7. Meanwhile, Caixin’s manufacturing PMI reading danced to the sluggish beat with a reading of 48.0, down from last month’s 48.4 reading. Looks like investors were right to get spooked ahead of these releases!

RBA keeps its rates at 2.00% – The Reserve Bank of Australia (RBA) recovered some of the Aussie’s intraday losses when it printed its decision to keep its interest rates at 2.00%.

Like in its decision last month, the central bank relayed its concerns over the impact of weak Chinese growth prospects, low commodity prices, and volatile global equities markets. Fortunately for the bulls, the RBA also kept mum on the Aussie being too high. If you recall, the high-yielding comdoll had gained a couple of pips against the dollar since the RBA’s meeting last month.

Major Currency Movers:

JPY – The yen had a see-saw trading session after forex traders bought the low-yielding even before the bell rang in Tokyo. The risk aversion theme played out until the middle of the Asian session, when the RBA’s less-dovish-than-expected decision and a bit of profit-taking took off some of the yen’s intraday gains.

USD/JPY dropped to a low of 112.16 before recovering to 112.62 while EUR/JPY hit a low of 122.07 before inching back up to 122.54. Ditto for GBP/JPY, which fell to 156.13 before closing at 156.90.

AUD – Weak Australian reports and speculations of an RBA rate cut weighed on the Aussie in early Asian trading, but soon saw a bit of recovery when the central bank turned out to be less dovish than expected.

AUD/USD revisited last week’s lows at .7109 before rising to .7133 while AUD/JPY dropped to 79.81 before recovering to 80.33. Even AUD/NZD fell to 1.0759 before the RBA boosted it back up to 1.0811.

Watch Out For:

  • 8:15 am GMT: Swiss retail sales (-1.2% expected, -1.6% previous)
  • 8:15 am GMT: Spanish manufacturing PMI (54.3 expected, 55.4 previous)
  • 8:30 am GMT: Switzerland manufacturing PMI (49.6 expected vs. 50.0 previous)
  • 8:45 am GMT: Italian manufacturing PMI (52.2 expected, 53.2 previous)
  • 8:55 am GMT: German unemployment change (-10K expected, -20K previous)
  • 8:55 am GMT: German final manufacturing PMI expected to remain at 50.2
  • 9:00 am GMT: Euro Zone final manufacturing PMI expected to remain at 50.1
  • 9:30 am GMT: U.K. manufacturing PMI (52.3 expected vs. 52.9 previous)
  • 10:00 am GMT: Euro Zone unemployment rate expected to remain at 10.4%

See more:

U.S. Session Forex Recap

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