Asian Session Forex Recap – May 25, 2016

  • New Zealand’s trade surplus rises to 292M NZD vs. 40M NZD expected, 189M in March
  • AU construction work done (q/q) down by 2.6% vs. 1.4% decline expected, 2.9% previous
  • PBoC fixes yuan to its weakest since March 2011
  • Greece offered a “breakthrough deal” by its creditors

Risk-taking was the name of the game during the Asian session, as forex traders priced in optimism from the U.S. session as well as other news from the major economies.

Major Events:

Overall risk appetite – Asian session forex traders started the day tracking the optimism from the better-than-expected U.S. new home sales report. The strong release added to speculations that the world’s largest economy is on its way to recovery, at least enough to get the Fed members to raise their interest rates.

Fed member Bullard also added fuel to the fire when he said in an interview that a presser is not necessary should they change their interest rates. Not surprisingly, the statement got the market bees buzzing about a July rate hike. Even commodity prices contributed to the overall risk-friendly theme with Brent crude oil rising by 1.28% to $49.23 while U.S. oil also climbed by 1.30% to $49.26.

Data from Australia and New Zealand – Construction activity in the Land Down Under fell by another 2.6% in Q1 2016, its third consecutive quarter of declines. A closer look tells us that the pickup in residential and commercial building isn’t making up for the losses in big resources projects.

New Zealand had a much better day thanks to a better-than-expected trade report. Exports rose by 4.0% while imports ticked 1.5% higher. Details reveal that fruit and timber exports led the rise in exports and offset much of the impact of the decline in dairy prices.

Greece offered a “breakthrough deal” by EZ finance ministers – After almost 11 hours of meeting, the Eurozone finance ministers have agreed to offer Greece a “breakthrough deal.”

In a nutshell, Athens has to follow new rules such as keeping its financing needs below 15% of its GDP and impose new painful fiscal reforms in exchange for 10.3B EUR in new funds and a possible debt relief in 2018. The plan was lauded by the International Monetary Fund (IMF), so much so that the lending institution has agreed to once again take part in the funding of the bailout for Greece.

Major Market Movers:

USD –The risk-friendly vibe took its toll on the low-yielding Greenback. USD/JPY is back to its open 110.01 open price after hitting a session high of 110.20 while USD/CAD is down by 38 pips (-0.29%).

EUR – The common currency got a small boost from Greece getting a new deal from its creditors.

EUR/USD is up by 10 pips (+0.09%), EUR/JPY is up by 11 pips (+0.09%), and EUR/GBP is up by 14 pips (+0.18%).

AUD and NZD – Comdolls like the Aussie and the Kiwi snuck in a few pips against their lower-yielding counterparts thanks to the overall risk appetite in the markets. In the Kiwi’s case, the intraday rally was fuelled by New Zealand’s better-than-expected trade data.

AUD/USD is up by 24 pips (+0.33%) and AUD/JPY is up by 24 pips (+0.30%) while NZD/USD is up by 18 pips (+0.27%) and NZD/JPY is up by 19 pips (+0.26%).

Watch Out For:

  • 6:00 am GMT: Switzerland’s UBS consumption indicator to improve from 1.51?
  • 6:00 am GMT: GfK German consumer climate expected to maintain 9.7 reading
  • 8:00 am GMT: German IfO business climate (106.9 expected vs. 106.6 previous)
  • 9:00 am GMT: Switzerland’s ZEW economic expectations (11.5 previous)

See more:

U.S. Session Forex Recap

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