Asian Session Forex Recap – July 5, 2016

  • RBA on a wait-and-see mode before inflation reports
  • NZ’s NZIER business confidence jumps from 2 to 19 in Q2 2016
  • AU AIG services index slips from 51.5 to 51.3
  • NZ ANZ commodity prices up by 3.7% vs. 1.1% previous
  • AU retail sales rises by 0.2% in May vs. 0.3% expected, 0.1% previous
  • AU trade deficit widens from 1.79B AUD to 2.22B AUD in May
  • China’s Caixin services PMI rises from 51.2 to 52.7 vs. June

Risk appetite took a turn during the Asian forex trading session despite the release of relatively better-than-expected economic reports. What’s up with that?!

Major Events:

Economic reports from Australia – While traders awaited the RBA’s decision, the Land Down Under had printed some tier 1 reports. Retail sales ticked 0.2% higher in May and missed the 0.3% growth expectations. Details also reveal the lack of price pressures across the board and supported the RBA’s worries that soft wage growth is weighing on consumer price growth.

The trade balance data wasn’t any comfort either. Australia printed a trade deficit of 2.22B AUD in May, a 24% increase from April’s 1.79B AUD deficit and marks the widest gap since March. What’s more, April’s numbers were revised 200 million AUD higher to 1.785B AUD. A closer look reveals exports rising by 1.0% while imports shot up by 2.0%.

The RBA holds its rates at 1.75% – As expected, the Reserve Bank of Australia (RBA) kept its rates steady at an all-time low of 1.75% in July. What market players were more interested in though, is the central bank’s biases after last month’s Brexit vote.

The RBA showed little concern over the issue, saying that “Any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern.

That doesn’t mean that Glenn Stevens and his gang aren’t ready and willing to pull the trigger again though! The most interesting bit in the RBA’s statement is its closing statement where it said that “…further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.” The statement led market player to believe that the RBA is looking at Q2 2016’s inflation numbers for any necessary policy changes. Make sure you got your eyes on it, too!

Oil prices slip – Oil prices slid down the charts today as traders worried that Brexit-related concerns would cap the demand for the commodity. If you recall, Black Crack prices had been receiving support from speculations that the oil market is “rebalancing” as well as the recent attacks in Nigeria’s oil-pumping facilities. Brent oil prices is currently down by 1.06% to $49.56 while U.S. crude is also down by 1.61% to $48.20.

Major Market Movers:

AUD – The Aussie shot up at the release of the RBA’s monetary policy decision but Australia’s weak data and overall risk aversion dragged it back down to its pre-RBA levels.

AUD/USD hit a high of .7545 but is now trading at the .7500 levels. AUD/JPY also shot up to 77.05 before going back down to 76.57 while EUR/AUD recovered from 1.4755 to trade back above the 1.4800 levels.

USD and JPY – The return to the risk aversion theme pushed low-yielding currencies like the dollar and yen higher across the board.

EUR/USD is down by 31 pips (-0.28%), GBP/USD is down by 48 pips (-0.36%) while USD/JPY is down by 47 pips (-0.46%), EUR/JPY is down by 88 pips (-0.77%), and GBP/JPY is down by a whopping 114 pips (-0.84%).

Watch Out For:

  • 8:15 am GMT: Spanish services PMI (55.2 expected, 55.4 previous)
  • 8:45 am GMT: Italian services PMI (50.3 expected, 49.8 previous)
  • 8:50 am GMT: French final services expected to remain at 49.9
  • 8:55 am GMT: German final services PMI expected to remain at 53.2
  • 9:00 am GMT: Euro Zone final services PMI (52.5 expected, 52.4 previous)
  • 9:30 am GMT: U.K. services PMI (53.1 expected, 53.5 previous)
  • 10:00 am GMT: Euro Zone retail sales (0.4% expected, 0.0% previous)
  • 10:30 am GMT: BOE financial stability report
  • 11:00 am GMT: BOE Governor Mark Carney to give a speech in London

See more:

U.S. Session Forex Recap

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