Asian Session Forex Recap – August 9, 2016

  • AU NAB business confidence down from 6 to 4 in July
  • AU NAB business conditions down from 12 to 8
  • China’s CPI (y/y) down from 1.9% to 1.8% vs. 1.7% growth expected/li>
  • China’s PPI (y/y) improves from -2.6% to -1.7% in July/li>

Risk aversion was the name of the game during the Asian session, as forex traders priced in economic report misses and bearish economic themes.

Major Events:

China’s CPI and PPI reports – Data from the world’s second largest economy showed that consumer prices rose by 1.8% from a year earlier in July, a bit lower than June’s 1.9% reading and a lot weakr than the government’s 3.0% target in 2016.

Meanwhile, China’s producer prices showed contraction for the 53TH MONTH IN A ROW, this time falling by an annualized rate of 1.7% against June’s 2.6% slip. Not a good sign especially after yesterday’s trade balance data reflected sharp declines for both exports and imports.

BOE’s Ian McCafferty’s comments – Monetary Policy Committee (MPC) member Ian McCafferty was under the spotlight today after he hinted that the BOE could still ease further in the coming months.

Earlier this month when the Bank of England (BOE) decided to step up its stimulus efforts, McCafferty voted for a rate cut but was against stepping up the QE program. Apparently, he believed that the move could wait until the BOE has more information on its hands.

In a newspaper interview, McCafferty warned that, if the U.K. economy slows, then “more easing is likely to be required, but that can easily be delivered in coming months.” Specifically, he said that “bank rate can be cut further, closer to zero, and quantitative easing can be stepped up.” Now that’s straight-talking!

Risk-takers stepped back – China’s weak data and McCafferty’s dovish comments got mixed in with a pretty weak close for the U.S. equities yesterday and a decline in commodity prices today. All these contributed to an overall risk-averse theme during the Asian session.

Major Market Movers:

GBP – The pound took hits following McCafferty’s dovish comments from a newspaper interview.

GBP/USD is down by 42 pips (-0.32%) to 1.2998, GBP/JPY dropped by 56 pips (-0.42%) to 133.03, and EUR/GBP is up by 29 pips (+0.34%) to .8528.

Comdolls – Commodity-related currencies like the Aussie, Loonie, and Kiwi took hits from China’s weak inflation and producer price reports, lower commodity prices, and overall risk aversion.

AUD/USD is down by 22 pips (-0.29%) to .7630, USD/CAD is up by 17 pips (+0.13%) to 1.3180, and NZD/USD is down by 8 pips (-0.11%) to .7133 after hitting a high of .7161.

Watch Out For:

  • 5:45 am GMT: Swiss unemployment rate expected to remain at 3.3%
  • 6:00 am GMT: German trade balance (23.2B EUR expected, 22.2B EUR previous)
  • 6:00 am GMT: Japan’s preliminary machine tool orders (y/y)
  • 6:45 am GMT: French government budget balance
  • 8:30 am GMT: U.K. manufacturing production (0.0% expected, 0.5% previous)F

See more:

U.S. Session Recap

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