Asian Session Forex Recap – Apr. 5, 2016

  • New Zealand NZIER business confidence drops from 15 to 2 in Q1 2016
  • New Zealand ANZ commodity price index down by 1.3% vs. 0.5% uptick in February
  • Australia trade balance shows widening trade deficit
  • Australia’s AIG services PMI down from 51.8 to 49.5
  • Japan’s labor cash earnings up by 0.9% in February vs. 0.2% expected, 0.0% previous
  • RBA keeps interest rates at 2.00%, cautions against Aussie strength

Risk aversion was the name of the game during the Asian session, as forex traders priced in weak economic data from Australia and New Zealand.

Major Events:

Weak economic reports – Asian session traders woke up to New Zealand printing its quarterly business confidence report, which dropped from an index reading of 15 to 2 in Q1 2016. Not a good development especially after the RBNZ had just cut its rates in anticipation of weaker business activity.

Australia didn’t fare much better. Aside from printing a worse-than-expected services PMI report, it also released a trade balance data showing a wider trade deficit than expected. The deficit ballooned to 3.41B AUD in February, higher than January’s upwardly revised 3.16B AUD figure, as exports fell while imports remain unchanged.

RBA keeps rates at 2.00% – The Aussie’s losses only lasted until the Reserve Bank of Australia (RBA) printed its monetary policy decision. Glenn Stevens and his gang kept their interest rates unchanged at 2.00% (as widely expected) and removed their concerns over volatile global financial markets from their official statement.

The only interesting part about the statement was the RBA’s stance on the Aussie’s strength. Instead of openly jawboning the currency, the central bank only stated that the appreciating exchange rate could “complicate the adjustment under way in the economy.” A pretty tame effort overall, which is probably why the Aussie bulls pounced at the statement’s release.

Major Currency Movers:

JPY – The low-yielding currency took advantage of the overall risk aversion, which was further boosted by a better-than-expected cash earnings report from Japan.

USD/JPY dropped by 44 pips (-0.40%), EUR/JPY fell by another 52 pips (-0.41%), and GBP/JPY declined by a whopping 73 pips (-0.46%).

AUD and NZD – Thanks to disappointing reports, the Aussie and Kiwi lost pips for most of the session. The former caught a break at the RBA’s event though, and recovered slightly against its counterparts.

AUD/USD hit a low of .7570 before recovering to .7613 and AUD/JPY dropped to 83.88 before closing at 84.41 while and AUD/NZD just plain gained 61pips (+0.55%) throughout the session.

Watch Out For:

  • 6:00 am GMT: German factory orders (0.5% expected vs. -0.1% previous)
  • 7:15 am GMT: Spanish services PMI (54.2 expected vs. 54.1 previous)
  • 7:45 am GMT: Italian services PMI (54.3 expected vs. 53.8 previous)
  • 7:50 am GMT: French final services PMI expected to remain at 51.2
  • 7:55 am GMT: German final services PMI expected to remain at 55.5
  • 8:00 am GMT: Euro Zone final services PMI expected to rise from 54.0 to 54.1
  • 8:30 am GMT: U.K. services PMI (expected at 53.9 vs. 52.7 previous)
  • 8:30 am GMT: Bank of England (BOE) meeting minutes)
  • 9:00 am GMT: Euro Zone retail sales (0.2% expected, 0.4% previous)

See more:

U.S. Session Forex Recap

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