Asian Session Forex Recap – May 27, 2016

  • U.K. GfK consumer confidence eases to -1 vs. -4 expected, -3 previous
  • Japan’s core CPI (y/y) slips by 0.3% vs. 0.4% downtick expected, -0.3% previous
  • Tokyo core CPI (y/y) down by 0.5% vs. -0.4% expected, -0.3% previous
  • China’s industrial profits up by 4.2% vs. 11.1% annualized increase in March

Forex price action saw tight ranges across the board, as a lack of economic reports convinced traders to stay in the sidelines ahead of major U.S. events.

Major Events:

Japan misses its inflation estimates – Consumer prices in Japan came in way below the BOJ’s targets, prompting renewed speculations of a currency intervention.

Prices excluding volatile items such as food and energy slipped for a second month in a row, this time by 0.3%. This is in line with March’s downtick and is only slightly better than the 0.4% decline expected. Meanwhile, Tokyo’s core CPI, widely considered as a leading indicator to the country’s figures, missed its 0.4% drop estimates with a 0.5% decline from a year ago.

April’s figures are closely watched by market players because the start of the fiscal year is when most businesses raise their prices. But with today’s releases coming in weak, traders are back to speculating more stimulus from the government including Abe possibly delaying a sales tax hike.

All eyes on Uncle Sam’s GDP and Yellen’s speech – Price action was a bit tight today, not only because there are no major catalysts but also because the overall risk appetite in the markets was limited by falling oil prices and cautiousness ahead of Yellen’s speech.

In a few hours Yellen is scheduled to give a speech, where she is widely expected to back other Fed members into hinting of a possible rate hike in June. The prospect of less easy money was enough to keep some equity bulls away. Uncle Sam will also print its preliminary GDP release, which adds to the uncertainty in the markets. The report is expected to print a 0.8% growth after Q4 2015’s 0.5% uptick.

Meanwhile the optimism from possibly seeing a hawkish Yellen speech was limited by commodities seeing more correction. Gold is down by 0.11%, Brent oil is down by 0.79% to $49.20, and U.S. crude oil is down by 0.81% to $49.08.

Major Market Movers:

JPY – The yen was dragged by Japan’s weak inflation data and intervention rumors before recovering in late Asian session trading.

USD/JPY fell to a low of 109.56 before recovering to 109.88 while EUR/JPY also dropped to 122.67 before popping back up to 122.94. Ditto for GBP/JPY, which slipped to 160.74 before trading at 161.17.

Comdolls – The comdolls traded on tight ranges thanks to falling commodity prices limiting the overall risk-friendly vibe in the markets.

AUD/USD was supported by the .7200 handle, NZD/USD stayed around the .6750 area, and USD/CAD only popped up by 26 pips despite the decline in oil prices.

Watch Out For:

  • G7 meetings in Japan continue today
  • 5:00 am GMT: BOJ’s own measure of CPI (y/y) 1.0% expected vs. 1.1% previous

See more:

U.S. Session Forex Recap

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