Article Highlights

  • Japan’s services producer price index up by 0.5% vs. 0.4% expected, 0.5% previous
  • AU quarterly private capital expenditures down by 2.1% vs. 0.5% slip expected, 3.3% decline in Q3 2016
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A lack of economic catalysts turned forex players’ attention to Australia’s CAPEX report and the Fed’s latest meeting minutes. Which currency do you think was the biggest mover during the session?

Major Events:

Australia’s CAPEX report – Data from the Australian Bureau of Statistics showed that private capital expenditure – a leading indicator of economic activity – had dropped by 2.1% in Q4 2016. This is much faster than the expected 0.5% decline and only a little bit slower than Q3 2016’s 4.0% drop.

The decline in private business spending in the December quarter marks the fourth consecutive quarter of contraction and is the eight of the last nine previous releases that showed weaknesses.

Details reveal that, in seasonally adjusted terms, expenditures on plant and machinery had fallen by 4.1% (down 25.5% on the year) while capex on plant and machinery equipment inched 0.4% higher in the quarter.

The Aussie dipped across the board at the news especially since some of the weaknesses in the report will feed directly into the GDP computation. Bad news for the RBA, which has shared its confidence that the economy will bounce back in Q4 after “temporary factors” pushed GDP lower in Q3.

Cautious trading environment – Market bulls took a step back during the Asian forex trading session after the latest FOMC meeting minutes failed to rally a fresh wave of optimism for the dollar and the U.S. economy.

As I mentioned in my U.S. session recap, Yellen and her gang shared their belief that it may be appropriate to raise rates again “fairly soon” if jobs and inflation data come in line with expectations.

Rate hike junkies weren’t too happy over the relatively cautious tone especially after Yellen had already hinted that waiting too long to raise rates would be “unwise.” This, along with the Fed mentioning the economic consequence of a stronger dollar, weighed on the U.S. Treasury yields and prompted some investors to stay in the sidelines until another market catalyst pops up.

Nikkei is down by 0.24%, Australia’s A SX 200 is down by 0.23%, the Shanghai index is down by 0.39%, and Hang Seng is down by 0.51%.

Market Movers:

AUD – The Aussie fell across the board after the latest CAPEX report raised doubts over the RBA’s optimistic bias for the economy.

AUD/USD dipped to a session low of .7665 before closing at .7688 (-0.29%), AUD/JPY dropped to 86.78 before recovering to 87.07 (-0.14%) while AUD/NZD straight up dropped by 56 pips (-0.52%) to 1.0667.

Watch Out For:

  • 8:00 am GMT: German final GDP expected to remain at 0.4%
  • 8:00 am GMT: German GfK consumer climate (10.3 expected, 10.2 previous)
  • 10:00 am GMT: Italian retail sales (0.2% expected, -0.7% previous)
  • 12:00 pm GMT: U.K. CBI realized sales (5 expected, -8 previous)

See also:

U.S. Session Recap
London Session Recap

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

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