Asian Session Forex Recap – May 30, 2016

  • Japan’s retail sales (y/y) down by 0.8% in April vs. 1.2% decline expected, 1.0% drop in March
  • Australia’s HIA new home sales down by 4.7% vs. 8.9% increase in March
  • Australia’s business inventories up by 0.4% in Q1 2016 vs. 0.4% decline in Q4 2015
  • Australia’s company operating profits (q/q) down by 4.7% in Q1 2016 vs. 2.8% decline previous
  • PBoC weakens yuan to its lowest fixing since February 2011
  • PM Abe to delay sales tax hike by 2.5 years?

Asian session forex traders caught up to the dollar frenzy from last Friday, as they priced in a Fed rate hike and a strong session for the U.S. equities.

Major Events:

Continued USD buying – The dollar extended its gains across the board as Asian session forex traders caught up to Friday’s dollar-buying trend. If you recall, a hawkish speech by Janet Yellen supported bets that the Fed would raise its rates over the next couple of months. It also didn’t hurt that the U.S. equities ended the week on a strong note despite threats of a Fed rate hike.

Australia’s data dump – The Aussie started the week on shaky footing, as the Land Down Under printed mostly worse-than-expected reports. New home sales fell by 4.7% in April, which not only put a dent on the 8.9% uptick in March but also supported claims that home building has peaked. The data hasn’t included the RBA’s recent rate cut though, so we’ll have to see if the trend holds next month.

Quarterly corporate reports didn’t exactly calm the Aussie bears either. Company profits for Q1 2016 fell by 4.7%, which translates to an 8.4% annualized decline. That’s the lowest quarterly figure since 2010, yo! Still, the overall picture remains mixed with inventories up by 0.4% (vs. 0.0% growth expected) while modest gains in wages and sales were also seen.

Abe to delay a sales tax hike? – Masahiko Komura, Vice President of the ruling Liberal Democratic Party (LDP) livened up yen trading today when he said that Prime Minister Shinzo Abe will delay Japan’s sales tax hike by 2.5 years.

Tomomi Inada, head of the LDP, then added fuel to the fire when she said that she’d already outlined an alternate plan for the sales tax hike delay. Abe hasn’t officially confirmed the delay, but the prospect was enough to send Nikkei 1.28% higher and the yen lower across the board.

Major Market Movers:

USD – The dollar continued to gain against its counterparts as Asian session traders caught up to the dollar-buying craze.

EUR/USD slipped by another 12 pips (-0.11%), USD/CHF inched 6 pips higher (+0.06%), and USD/CAD rocketed by 63 pips (+0.48%).

JPY – The yen got clobbered across the board at the rumors of Abe possibly delaying a sales tax hike originally scheduled for April 2017.

USD/JPY rose by 70 pips (+0.63%), EUR/JPY rallied by 66 pips (+0.54%), and GBP/JPY shot up by a nice 110 pips (+0.68%).

AUD – The Aussie got one-two-punched by the dollar strength and Australia’s weaker-than-expected reports.

AUD/USD fell by 16 pips (-0.25%), EUR/AUD inched 24 pips higher (+0.16%), and AUD/NZD slipped by 17 pips (-0.16%).

Watch Out For:

  • U.K. on Spring Bank Day holiday
  • 6:00 am GMT: German import prices (0.4% expected vs. 0.7% previous)
  • 7:00 am GMT: KOF economic barometer (102.9 expected vs. 102.7 previous)
  • 7:00 am GMT: Spain’s flash CPI (-1.0% expected vs. -1.1% previous)

See more:

U.S. Session Forex Recap

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