Asian Session Forex Recap – Nov. 10, 2016

  • Japan’s core machine tools orders down by 3.3% vs. 1.8% decline expected, 2.2% slip in August
  • AU MI inflation expectations down from 3.7% to 3.2% in November
  • U.K. RICS house price balance up from 18% to 23%
  • AU home loans pops up by 1.6% vs. 1.5% decline expected, 2.7% slip previous
  • RBNZ Gov. Wheeler isn’t ruling out currency intervention

Risk appetite reigned supreme during the Asian session, as forex traders caught up to the post-election rallies from the previous sessions.

Major Events:

Green day for Asian equities – Risk-takers partied in the streets after the European and U.S. traders took Trump’s win much better than gloom and doom analysts have expected.

With so much uncertainty around Trump’s future economic policies, market players chose to focus on the prospect of higher inflation and faster growth from Trump’s promises to cut taxes and increase infrastructure and defence spending. Of course, it also didn’t hurt that some profit-takers closed their positions after yesterday’s selloff.

Australia’s A SX 200 is up by 3.34%, Hang Seng is up by 1.98%, the Shanghai index is up by 1.35%, and Nikkei is up by a whopping 6.86%.

RBNZ decision and Wheeler’s presser – As mentioned earlier, the Reserve Bank of New Zealand (RBNZ) cut its rates to a new record low of 1.75%, something that traders had already expected. The key takeaway from the release is that the central bank may not be too gung ho about cutting its rates further anytime soon.

Though is warned that “a decline in exchange rate is needed,” and that “monetary policy will continue to be accommodative,” it also admitted that “policy settings, including today’s easing, will see growth strong enough to have inflation settle near the middle of the target range.” On top of that, the RBNZ also switched up its last words to “policy may need to adjust accordingly” from “further policy easing will be required” back in September.

The game isn’t over for RBNZ Governor Wheeler though! In a media briefing after the statement was released, he also shared that he has “an open mind on [currency] intervention.” Though he didn’t give specifics on the conditions of the intervention, his jawboning was enough to keep Kiwi bulls at bay.

PBoC weakens yuan against dollar – Earlier today, the People’s Bank of China (PBoC) flexed its muscles by setting the yuan’s midpoint rate at 6.7885 per dollar, its lowest levels since August 2010. This comes a day after Trump, who regularly branded China as a currency manipulator and promised high tariffs on Chinese products, won the latest Presidential elections. Talk about firing the first salvo!

Major Market Movers:

USD – The Greenback took a breather from its rallies and gave up a pip or two to its major counterparts.

EUR/USD inched 4 pips higher (+0.04%) to 1.0937 after hitting a session high of 1.0955 while USD/JPY slipped by 61 pips (-0.58%) to 105.24 and AUD/USD popped up by 20 pips (+0.26%) to .7665.

NZD – The New Zealand dollar popped higher when the RBNZ’s statement hinted an end to the central bank’s rate cut cycle, but soon dropped back down after Wheeler said that he’s open to a currency intervention.

NZD/USD is down by 32 pips (-0.44%) to .7266, NZD/JPY fell by 74 pips (-0.96%) to 76.47, and AUD/NZD shot up by 66 pips (+0.63%) to 1.0547.

Watch Out For:

  • 7:00 am GMT: preliminary machine tools orders
  • 8:45 am GMT: French industrial production (0.3% expected, 2.1% previous)
  • 8:45 am GMT: French preliminary non-farm payrolls (q/q) expected to remain at 0.2%
  • 10:00 am GMT: Italian industrial production (-1.0% expected, 1.7% previous)

See also:

U.S. Session Recap
London Session Recap

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