Asian Session Forex Recap – Oct. 12, 2016

  • AU Westpac consumer sentiment up by 1.1% vs. 0.3% growth in September
  • Japan’s core machinery orders down by 2.2% vs. 4.4% decline expected, 4.9% growth in July

A pretty productive day for risk-takers, as a string of positive news all contributed an overall risk-friendly forex trading environment.

Major Events:

Theresa May backing out of “hard Brexit?” – The biggest story of the hour is U.K. Prime Minister Theresa May accepting calls to allow Parliament to vote on her Brexit game plan. Today Parliament is set to debate a motion from the opposition calling for a “full and transparent debate on the government’s plan for leaving the EU” and for Parliament to be able to “properly scrutinize that plan” before she begins formal talks.

Remember that just last week May announced the schedule for triggering Article 50, which weighed on the pound as it hinted that the Prime Minister will power through with barely any thought to its economic impact.

PBoC further weakens the yuan – The People’s Bank of China (PBoC) weakened its currency for a sixth day in a row today, the longest run in nine months, despite the overall dollar strength in the past couple of days.

This move came at the heels of China’s week-long holiday and its domestic currency recently getting qualified to become part of the International Monetary Fund’s Special Drawing Rights at the beginning of the month.

More BOJ jawboning – Bank of Japan (BOJ) officials are at it again! In a speech earlier today, BOJ Governor Haruhiko Kuroda hinted at further easing, saying that “We are prepared to ease policy again, including lowering short-term rates, if we judge that the merits outweigh the costs.” If you recall, some analysts are doubting the BOJ’s capacity to sustain its current stimulus programs.

BOJ board member Yutaka Harada also supported further easing, saying that the central bank is “quite distant from reaching the limits of monetary easing” and should not hesitate to expand monetary stimulus if global economic shocks get in the way of its goals. Despite the jawboning though, the yen only saw limited losses across the board.

Oil prices pick up – The Black Crack gained ground ahead of the informal talks between the major oil producers. See, OPEC is set to talk with non-members today in the hopes of agreeing to a global production cap for at least six months.

Brent crude oil is up by 0.46% to $52.65 while U.S. crude oil prices is also up by 0.32% to $50.95.

Major Market Movers:

GBP – The pound shot up early in the Asian session when the news about Theresa May softening her “hard Brexit” stance hit the newswires.

GBP/USD hit a session high of 1.2326 before closing at 1.2293 (+1.38%), GBP/JPY shot up to 127.57 before ending the session at 127.15 (+1.33%), and EUR/GBP hit a low of .9002 before closing at .8990 (+1.40%).

Comdolls – A weak Chinese currency is good for China’s economic growth, which is also good for commodity demand. Of course, it also didn’t hurt that oil prices received a boost before today’s informal meetings with OPEC.

AUD/USD is up by 37 pips (+0.49%) to .7577, USD/CAD is down by 29 pips (-0.22%) to 1.3213, and NZD/USD is up by 26 pips (+0.37%) to .7082.

Watch Out For:

  • 6:00 am GMT: German wholesale price index (0.3% expected, -0.7% previous)
  • 6:00 am GMT: Japan’s preliminary machine tool orders
  • 6:45 am GMT: French final CPI expected to remain at -0.2%
  • 9:00 am GMT: ZEW economic expectations
  • 9:00 am GMT: euro Zone industrial production (1.4% expected, -1.1% previous)

See also:

U.S. Session Recap
London Session Recap

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