Asian Session Forex Recap – August 2, 2016

  • Japan monetary base down from 25.4% to 24.7% in July
  • AU building approvals don by 2.9% vs. 0.9% expected, 5.4% decline in May
  • AU trade balance shows 3.2B AUD deficit vs. -2.0B expected, 2.42B deficit in May
  • NZ inflation expectations (q/q) up from 1.6% to 1.7% in Q2 2016
  • Japan’s consumer confidence dips from 41.8 to 41.3 in July
  • RBA cuts rates from 1.75% to 1.50%

Thanks to a bit of risk appetite and mixed economic data, the higher-yielding currencies locked in a couple of pips against their lower-yielding counterparts.

Major Events:

Australia’s data releases – Just before the RBA’s event, the Land Down Under printed its building approvals reports as well as its trade numbers. Building approvals fell by 2.9 in June, lower than the 0.5% uptick expected and marks the second consecutive month of decline. Heck, even the May’s decrease was revised LOWER, from -5.2% to -5.4%. A closer look reveals broad-based weakness, supporting claims that Australia’s residential construction boom has peaked.

Even the trade numbers disappointed expectations. Australia printed a deficit of 3.2B AUD in June, lower than May’s 2.42B AUD figure and marks the widest deficit in five months. We don’t have far to look for the culprit. Exports declined by 1.0% for the month following a 1.0% increase in May, while imports popped up by 2.0% after showing a similar uptick in the previous month.

RBA cuts its rates by 0.25% – Aaaand cut! A few hours ago the Reserve Bank of Australia (RBA) decided to cut its interest rates from 1.75% to a record low of 1.50%.

In their statement, RBA Governor Stevens and his crew said that “prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy” this month. The central bank is still generally upbeat though, saying that the economy is growing at a moderate pace despite a “very large” decline in business investment.

Mixed risk sentiment – Asian equities started the day on a weak note following an unexciting day for the U.S. equities. Risk appetite trickled in though, thanks to oil prices showing a bit of momentum during the late Asian session trading.

It also didn’t hurt that Japan’s markets are now anticipating Abe’s stimulus announcement. Speaking of which, anybody know exactly when his speech is due? Word around the hood is that he will also announce a “Cabinet reshuffling” after the stimulus program is announced.

Major Market Movers:

USD and JPY – Low-yielding currencies like the dollar and yen took some hits today after a bit of risk appetite gripped the markets.

USD/JPY is up by 8 pips (+0.08%) to 102.47 after hitting a high of 102.85, GBP/USD is up by 8 pips (+0.06) to 1.3188, and EUR/JPY is up by 14 pips (+0.12%) to 114.48 after rising to a high of 114.82.

AUD – The Aussie got one-two-punched by Australia’s weaker-than-expected economic reports and a rate cut from the RBA.

AUD/USD is down by 10 pips (+0.13%), EUR/AUD is up by 13 pips (+0.09%), and AUD/NZD is down by 12 pips (-0.11%) to 1.0492.

Watch Out For:

  • 2:30 am GMT: AU commodity prices
  • 3:00 am GMT: Spanish unemployment change (-70K expected, -124.3K previous)
  • 3:15 am GMT: Swiss retail sales (-2.0% expected, -1.6% previous)
  • 3:30 am GMT: Switzerland manufacturing PMI (51.9 expected, 51.6 previous)
  • 4:30 am GMT: U.K. construction PMI (44.2 expected, 46.0 previous)
  • 5:00 am GMT: Euro Zone PPI (0.4% expected, 0.6% previous)

See more:

U.S. Session Recap

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