Asian Session Forex Recap – August 18, 2016

  • Japan’s trade balance shows 0.32T JPY surplus vs. 0.14T JPY expected, 0.34T previous
  • AU unemployment rate slips from 5.8% to 5.7%
  • AU employment change up from 10.8K to 26.2K vs. 10.2K expected

The dollar’s forex price action was a mixed bag of nuts, as economic reports got mixed in with risk sentiment.

Major Events:

Japan’s trade data – Trade data from the world’s third largest economy reflected a narrower surplus for the month of July, as weaker demand from both domestic and international markets led to double digit drops in both imports and exports. Yipes!

The Ministry of Finance reported a trade surplus of 513.5B JPY in July after clocking in a 692.8B JPY surplus in June. A closer look tells us that imports have fallen by a whopping 24.7% from last year, way faster than June’s 18.8% annualized drop and the expected 20.6% decline.

Even exports gave market players chills as it showed a decline of 14% in the twelve months to July, also faster than June’s 7.4% annualized rate. Basically, both exports AND imports just clocked in their fastest rate of declines since 2009.

If the headline numbers aren’t enough to spook you, then you should also know that Japan’s exports to China are down by an annualized rate of 13% in July while shipments to the U.S. also dropped by 12%. Looks like the yen’s recent strength is REALLY starting to hurt! Will BOJ Governor Kuroda and his gang do something about it this week?

AU employment growth – Headline numbers from Australia’s employment reports came in better-than-expected, with the unemployment rate falling to a three-year low of 5.7% and the net jobs increase coming in at 26,200 for the month of July. Monthly hours also popped up by 0.2% while labor force participation rate remained unchanged at 64.9%.

A closer look reveals a weaker trend for Australia’s job-seekers. See, the strong net jobs increase is mostly due to 71,600 part-time workers getting jobs while 45,400 workers lost employment for the month.

Some analysts also point out that the surge in part-time jobs might have something to do with the extended counting in the recent elections. Last but not the least, wage growth is still limited by Australia’s weak inflation rate. Aussie bulls seem happy with the headline numbers though, as they pushed the local currency higher across the board.

More jawboning from Japanese officials? – Another day, another chance at jawboning the yen. With USD/JPY still flirting with the 100.00 psychological mark, Japanese officials didn’t waste time in jawboning the currency some more.

Etsuro Honda, adviser to Prime Minister Shinzo Abe, said in an interview that there’s “more than 50% possibility of bold monetary easing measures” next month from the BOJ and that however their assessment turns out, they already know that “monetary policy hasn’t been eased enough.”

Meanwhile Ministry of Finance officer Asakawa is back under the spotlight, though he mostly repeated his warnings of the officials monitoring the FX market closely and their willingness to “act on excessive FX moves.”

Mixed dollar action – The dollar lost pips against the European and the lower-yielding currencies, but gained a couple against the comdolls. If you recall, less-hawkish-than-expected FOMC meeting minutes inspired dollar weakness across the board.

Major Market Movers:

USD – EUR/USD gained 31 pips (+0.28%) to 1.1313, GBP/USD shot up by 21 pips (+0.16%) to 1.3055, and USD/CAD slipped by 29 pips (-0.23%) to 1.2828.

JPY – The yen lost a few pips on the release of Japan’s weak trade data and a bit of jawboning from Japanese officials, though it looks like it’s gaining its momentum back.

USD/JPY slid by 30 pips (-0.30%) to 99.96 after falling to a low of 99.66, EUR/JPY hit a low of 112.65 before closing at 113.05 (-0.04%), and GBP/JPY touched 130.04 before closing at 130.46 (+0.14%).

AUD – The Aussie shot higher at the release of better-than-expected employment numbers from Australia.

AUD/USD is up by 58 pips (+0.76%) to .7704, AUD/JPY is up by 33 pips (+0.43%) to 76.99, and EUR/AUD is down by 73 pips (-0.50%) to 1.4683.

Watch Out For:

  • 8:00 am GMT: Euro Zone current account
  • 8:30 am GMT: U.K. retail sales (0.1% expected, -0.9% previous)
  • 9:00 am GMT: Euro Zone final CPI (y/y) expected to remain at 0.2%
  • 9:00 am GMT: Euro Zone final core CPI expected to remain at 0.9%
  • 11:30 am GMT: ECB monetary policy meeting minutes

See more:

U.S. Session Recap

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