Article Highlights

  • Japanese Dec retail sales down by 1.1% y/y vs. expected 0.1% gain
  • Australia’s quarterly import prices down by 0.3% vs. 0.8% decline expected, 1.4% uptick last month
  • Australia’s quarterly export price down by 5.4% vs. 3.9% decline expected
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A pretty mixed trading session for the major currencies, as forex traders priced in a bit of risk aversion and profit-taking.

Major Events:

Australia’s trade data – The Land Down Under printed mixed trade numbers with quarterly imports only down by 0.3% when analysts had expected a 0.8% decline and exports down by 5.4% against the expected 3.9% downtick. Underlying numbers aren’t as accommodating though.

The latest numbers set back the terms of trade – the ratio of export prices to import prices –to a decade low in Q4 2015, down more than 50% from the peak in 2011 and 30% lower than the long-term average. If you recall, Australia’s export-driven economy is dealing with falling commodity prices and weakening demand from China, its largest trading partner.

PBoC injects more moolah – The PBoC made headlines again by injecting 340 billion yuan into the economy. 80 billion yuan is injected via 7-day reverse repos and 260 billion came thought 28-day reverse repos. This puts the total weekly open market operations intervention to a total of 590 billion yuan this week, the largest since February 2013. Market players kinda expected the move ahead of a possible liquidity crunch during China’s Golden Week celebrations.

Risk aversion bank in play? – Low-yielding currencies gained a couple of pips against their major counterparts, thanks to a mix of risk aversion and profit-taking from the previous session’s price movements. On one hand, Asian session traders didn’t care much for the dovish tones of the Fed and the RBNZ. On the other hand, traders who had traded the central bank events and Fonterra’s price cut had taken profits from their trades and fueled the comdolls’ mini rallies from a less-horrible-than-expected Australian trade data.

Major Currency Movers:

AUD – The high-yielding Aussie caught the Kiwi’s risk aversion bug following Fonterra’s price cuts. The comdoll eventually recovered its losses and even logged in gains when Australia’s trade report didn’t print apocalyptic numbers.

AUD/USD fell to a session low of .7008 before rising to .7045 while AUD/JPY dropped to 83.02 before closing at 83.62. Even EUR/AUD popped up to 1.5589 before settling down to 1.5450.

JPY – The yen’s prices reflected the see-saw action of risk sentiment throughout the session. USD/JPY hit a session high of 118.82 before settling to 118.69 while EUR/JPY also rose to 129.47 before closing at 129.18. Ditto for GBP/JPY, which settled to 169.07 after reaching a high of 169.55.

Watch Out For:

  • 7:00 am GMT: German import prices (-1.0% expected, -0.2% previous)
  • 8:00 am GMT: Spanish unemployment rate to slip from 21.2% to 21.1%?
  • 9:30 am GMT: U.K. quarterly GDP to rise by 0.5% vs. 0.4% last month?
  • 9:30 am GMT: U.K. annualized GDP expected to rise by 1.9% vs. 2.1% last month
  • 11:00 am GMT: CBI realized sales (expected at 18 vs. 19 previous)

See more:

U.S. Session Forex Recap

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