Article Highlights

  • Japan’s BSI manufacturing index slips to 1.1 vs. 8.4 expected, 7.5 reading in Q4 2016
  • AU home loans pops up by 0.5% vs. 0.9% decline expected, 0.2% growth previous
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The dollar’s price action was a mixed bag of nuts, as risk appetite got mixed in with a bit of profit-taking ahead of today’s NFP release.

Major Events:

Data releases from Japan and Australia – With not a lot of top-tier reports on the docket, forex traders focused on lower-tier reports printed during the Asian trading session.

Australia’s home loans unexpectedly rose in January, as financing for investment purposes recovered from last month’s contraction. The headline report showed a 0.5% growth, which is stronger than December’s 0.2% growth and the expected 0.9% decline.

Lending for investment purposes rocketed by 4.2%, the highest since May 2015, after contracting by 1.0% in December. This puts the annualized increase at a whopping 27.5%! Meanwhile, the value of loans to owner-occupiers fell by 0.2% and registered a 1.9% gain from a year earlier. The report puts the RBA on the spot especially after it had just boasted that “supervisory measures have contributed to some strengthening in lending standards.”

Meanwhile, Japan’s business sentiment index (BSI) surprised to the downside by clocking in at 1.1 when analysts had expected an 8.4 reading. The decline in manufacturing conditions supports the need for more stimulus, so it might have factored in the yen’s losses earlier today.

Overall risk appetite – It was good vibes all around for the Asian session traders, as they priced in the ECB’s not-so-dovish policy statement, a potentially strong NFP release, and a bit of recovery in oil prices.

If you’ve read my previous recaps, then you’ll know that the euro made pips rain yesterday when Draghi and his gang not only upgraded their inflation and growth forecasts, but also hinted that there’s no need for more stimulus in the near term.

Meanwhile, a positive U.S. initial claims report boosted chances of a strong NFP reading and added to the overall risk appetite in the air. Even the decision of South Korea’s constitutional court to uphold the impeachment of President Park Geun-hye added into the mix, as clarity on her impeachment boosted the Korean Won.

Market Movers:

JPY – The low-yielding yen caught was one-two punched by the markets thanks to overall risk appetite and a weak Japanese manufacturing PMI that pointed to more stimulus from the BOJ.

USD/JPY shot up by another 32 pips (+0.28%) to 115.19, EUR/JPY climbed by 38 pips (+0.31%) to 122.04, and GBP/JPY inched another 23 pips (+0.16%) higher to 140.09.

USD – The dollar’s price action was a mixed bag of nuts, as it gained more pips against its lower-yielding counterparts but lost to the comdolls.

USD/CHF rose by 18 pips (+0.18%) to 1.0119 but AUD/USD also inched 12 pips (+0.16%) higher to .7517, USD/CAD dipped by 11 pips (-0.08%) to 1.3502, and NZD/USD climbed by 13 pips (+0.19%) to .6910.

Watch Out For:

  • 7:00 am GMT: German trade balance (19.2B EUR expected, 18.4B EUR previous)
  • 7:45 am GMT: French industrial production (0.6% expected, -0.9% previous)
  • 9:00 am GMT: Italian quarterly unemployment rate expected to remain at 11.6%
  • Day 2 of ECOFIN meetings
  • 9:30 am GMT: U.K. manufacturing production (-0.6% expected, 2.1% previous)
  • 9:30 am GMT: U.K. industrial production (-0.4% expected, 1.1% previous)
  • 9:30 am GMT: U.K. goods trade balance (-11.1B GBP expected, -10.9B GBP previous)
  • 9:30 am GMT: U.K. construction output (-0.3% expected, 1.8% previous)
  • 9:30 am GMT: U.K. consumer inflation expectations

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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