Asian Session Forex Recap – May 24, 2016

  • AU CB leading index up by 0.1% in March vs. 0.3% decline in February
  • RBA’s Stevens hints at more rate cuts
  • Japan’s flash all industries activity up by 0.1% vs. 0.7% expected, -0.9% previous

Ho-hum. Thanks to a lack of major economic reports, Asian session forex traders took their cues from the U.S. markets as well as the RBA Governor’s latest speech.

Major Events:

Overall risk aversion – With no major economic report on the docket, forex traders took their cues from their U.S. counterparts. See, more and more traders are pricing in a Fed rate hike either in June or July.

The prospect of less easy money weighed on the equities markets, which carried over to the forex scene. Of course, it also didn’t help that commodities like oil and gold gave up some of their weekly gains today.

Nikkei is down by 0.80%, Australia’s ASX is down by 0.05%, The Shanghai Composite is down by 0.62%, and Hong Kong’s Hang Seng is down by 0.38%. Meanwhile, Brent crude oil is down by 0.46% to $48.13 and U.S. crude oil is down by 0.35% to $47.91.

Is Stevens hinting at more rate cuts? – A few hours ago the Reserve Bank of Australia (RBA) Governor Glenn Stevens gave a speech at the Trans-Tasman Business Circle boardroom briefing. In it he defended the RBA’s inflation-targeting strategy, saying that it’s “the best policy framework they’ve ever had.”

More importantly, the Stevens warned that there will be “years of hard work” in store for the next RBA Chief. Though Stevens also emphasized that the RBA’s decisions aren’t knee-jerk reactions to the inflation reports, his gloomy warning was taken as a sign that the RBA could still cut its rates this year.

Japan denies intervention rumors – The low-yielding yen see-sawed across the board after Japan’s Finance Minister Taro Aso denied rumors of a currency intervention.

In a speech before the Parliament, Aso repeated that the government has no intention of boosting its exports by undercutting the value of the yen. Aso didn’t completely slam the door on currency interventions though, saying only that they have no intention on devaluing the yen “in a consistent manner.”

Major Market Movers:

AUD – The Aussie took a step back across the board following hints of more interest rate cuts from RBA Governor Stevens.

AUD/USD is down by 27 pips (-0.37%), AUD/JPY is down by 24 pips (-0.30%), and EUR/AUD is up by 52 pips (+0.34%).

JPY – The yen started the day on a weak footing but soon recovered some of its intraday losses after Japan’s Taro Aso denied rumors of a currency intervention.

EUR/JPY popped up to 122.70 before settling down to 122.54 while GBP/JPY rose to 158.68 before slipping back down to 158.34.

USD – The low-yielding Greenback snuck in a couple more pips against its higher-yielding counterparts thanks to the overall risk aversion vibe.

EUR/USD slipped by 3 pips (-0.03%), USD/CHF is up by 14 pips (+0.14%), USD/CAD is up by 13 pips (+0.10%), and NZD/USD is down by 43 pips (-0.64%).

Watch Out For:

  • 6:00 am GMT: Switzerland’s trade balance (3.14B CHF surplus expected vs. 2.16B CHF surplus in March)
  • 6:00 am GMT: Germany’s final GDP expected to remain at 0.7%
  • 8:30 am GMT: U.K. public sector net borrowing (6.3B GBP expected vs. 4.2B GBP previous)
  • 9:00 am GMT: German ZEW economic sentiment (12.1 expected vs. 11.2 previous)
  • 9:00 am GMT: ZEW economic sentiment (23.4 expected vs. 21.5 previous)
  • 9:00 am GMT: U.K. inflation report hearings
  • 10:00 am GMT: U.K. CBI realized sales (6 expected vs. -13 previous)

See more:

U.S. Session Forex Recap

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