Asian Session Forex Recap – May 18, 2016

  • Australia’s MI leading index up by 0.2% in April vs. 0.1% decline in March
  • Australia’s quarterly wage price index up by 0.4% vs. 0.5% expected and previous
  • China’s house prices up by 6.2% in April vs. 4.9% uptick in March
  • Japan’s revised industrial production up by 3.8% vs. 3.6% expected and previous

The dollar clobbered its counterparts during the Asian session, as forex traders priced in a potentially hawkish FOMC minutes today.

Major Events:

Japan avoids a technical recession – As I mentioned in my U.S. session recap, Japan’s GDP report had surprised to the upside. The economy had grown by 0.4% in Q1 2016, higher than the expected 0.1% uptick and marks the strongest since March 2015. Even the annualized figures blasted above its estimates, coming in at 1.7% against the expected 0.2% growth.

The yen initially gained at the release of the better-than-expected report, but soon lost its ground when market players had shifted their focus on a possible rate hike from the Fed.

All eyes on the FOMC minutes on tap – The dollar was the star of the Asian session show, as traders priced in a potentially hawkish FOMC meeting minutes. If you recall, back in December the Fed had raised its rates for the first time in seven years and forecasted at least four rate hikes in 2016.

Since then the Fed has cut its rate hike bets down to two, citing low inflation and heightened global market volatility. But with Fed members such as John Williams and Dennis Lockhart hinting at more rate hikes, the interest rate junkies are hoping that today’s FOMC meeting minutes report would turn out to be more hawkish than Yellen in the days after the Fed’s latest policy decision.

Major Market Movers:

USD – Expectations of a hawkish FOMC meeting minutes kept the Greenback afloat for most of the Asian session.

EUR/USD is down by 30 pips (-0.27%) and GBP/USD slipped by 22 pips (-0.15%) while USD/CHF gained 23 pips (+0.24%). Even the comdolls lost pips to the dollar as AUD/USD fell by 42 pips (-0.57%), USD/CAD popped up by 33 pips (+0.26%), and NZD/USD slipped by 19 pips (-0.28%).

JPY – A better-than-expected GDP release from Japan sent the yen higher across the board, but risk-taking and Fed rate hike expectations soon pushed the low-yielding currency lower.

USD/JPY fell to a session low of 108.72 before closing at 109.03 while EUR/JPY slipped to 123.04 before closing at 123.05. Ditto for GBP/JPY, which dipped to 157.03 before closing at 157.41.

Watch Out For:

  • 8:30 am GMT: U.K. employment reports. What are traders expecting to see from the unemployment rate, claimant count change, and average earnings index releases today? Read Forex Gump’s trading guide if you’re trading the pound today!
  • 9:00 am GMT: Euro Zone final CPI (-0.2% expected and previous)
  • 9:00 am GMT: Euro Zone final core CPI (0.7% expected vs. 0.8% previous)

See more:

U.S. Session Forex Recap

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