Article Highlights

  • Japanese core machinery orders slumped by 14.4% vs. -7.3% forecast
  • Japan’s PPI down by 3.4% vs. -0.4% forecast
  • Australian employment numbers beat analyst forecasts
  • Japan core machineries orders shows biggest decline in 18 months
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Forex price action was a mixed bag of nuts, as geopolitical events got mixed in with positive economic reports from China and Australia.

Major Events:

PBoC boosts cash and confidence – Just when the Chinese equities market was set to follow the footsteps of its U.S. counterparts, the PBoC did its bit to help prop up risk sentiment. The central bank boosted liquidity as it bought 160 billion yuan ($24B) worth of seven-day reverse repos before the market opened. This is the biggest one-day operation since February 2015 and brings the total cash injection up to 230 billion yuan this month. The PBoC also made little changes to its USD/CNY fix, which further hinted that China isn’t too in a hurry to devalue its currency.

Inflation worries weigh on Nikkei – Concerns over low oil prices and weaker global economic growth weighed on Japanese exporting companies and took Nikkei with it. It also didn’t help that Japan’s core machinery orders fell by its fastest pace in 18 months on the back of weak business sentiment and falling commodity prices. Nikkei fell by more than 4% in Wednesday’s trading and the low-yielding yen shot up across the board.

Australian jobs report – The Aussie was relatively supported throughout the session, thanks in part to Australia’s better-than-expected employment numbers. A net of 1,000 workers lost jobs in December, lower than the 11,000 decline expected. Not only that, but November’s figures were also revised higher from 71,400 to 74,900.

The unemployment rate also surprised to the upside with a 5.8% reading when market players had been expecting an uptick to 5.9%. Last but not the least, full-time employment shot up by 17,600, overshadowing the fall of 18,500 part-time jobs. This is good news as it signals more stable income for more Australian workers.

The only dark cloud was the labor participation rate declining by 0.1% to 65.1%, which suggests that the subdued unemployment rate might have more to do with less workers looking for jobs.

Geopolitical risks – Risk appetite took some hits today when a series of coordinated gun and bomb attacks were made in Jakarta, Indonesia. No one has claimed responsibility for the attacks yet, but the event was enough to inspire jitters among traders. It also didn’t help that police had to conducted operations around the Sydney Opera House and at Manly “as a precautionary measure.” Yipes!

Major Currency Movers:

AUD – Not even strong employment numbers from Australia was able to hold off the bears throughout the session. AUD/USD slipped by 31 pips (-0.45%) while AUD/JPY fell 62 pips (-0.76%). EUR/AUD also saw an 88-pip rally while GBP/AUD inched 24 pips higher (+0.12%).

JPY – Thanks to risk aversion in the Japanese markets and geopolitical uncertainty, forex traders flocked to the low-yielding yen early in the session.

USD/JPY fell by 37 pips (-0.31%) while EUR/JPY slipped by 23 pips (-0.18%) and GBP/JPY slid by 107 pips (-0.63%).

Watch Out For:

  • 700 am GMT: German wholesale price index (0.1% expected vs. -0.2% previous)
  • 9:00 am GMT: Italian industrial production (0.3% expected vs. 0.5% previous)
  • 12:00 pm GMT: BOE monetary policy decision. Read all about why you should be watching GBP pairs when statements are released!

See more:

U.S. Session Forex Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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