Higher bond yields and talks of higher inflation spooked risk-takers today, dragging the higher-yielding currencies lower. A word or two from BOJ officials limited the yen’s gains, however.
- Australia’s AIG services index improves from 52.0 to 54.9 in January
- Australia’s MI inflation gauge rises by 0.3% vs. 0.1% growth in December
- New Zealand’s ANZ commodity prices up by 0.7% vs. 1.9% decline in December
- Australia’s ANZ job ads shoot up by 6.2% vs. 2.7% decline in December
- China’s Caixin services PMI up to 54.7 vs. 53.6 expected, 53.9 previous
Better-than-expected lower-tier reports
There were no major bombshells during the Asian session, so forex traders only had lower-tier data from Australia and China to price in.
A service PMI from Australia showed improvement in January, with the employment component showing exceptional results. Meanwhile, an inflation gauge as well as a job ads report also popped higher for the month.
What caught market players’ attention was China’s Caixin services PMI, which registered at 54.6 when analysts were only expecting a 53.6 reading for January. Ditto for the composite PMI report, which clocked in a seven-year high of 53.7 in January.
BOJ repeats commitment to easy policies
In his scheduled speech in Parliament, Bank of Japan (BOJ) Governor Haruhiko Kuroda took the opportunity to emphasize that he and his team are being (and want us to be) patient.
He said that it’s still “extremely important to achieve our 2 percent inflation target,” and that “Japan’s inflation remains distant from our target, so we need to patiently continue with powerful monetary easing.”
His remarks helped stem the yen’s gains, which had been gaining traction due to overall risk aversion in early Asian session trading.
Overall risk aversion
The Asian bourses (and some commodities) took cues from their U.S. counterparts, which took a strong NFP report to mean higher bond yields and stronger inflation down the road.
For newbies out there, you should know that higher government bond yields and strong inflation make it easier for risk-averse investors to stick to lower-yielding assets.
- Nikkei is down by 0.61% to 22,640;
- Australia’s A SX 200 is 0.94% to 5,989.5, and
- Hang Seng is down by 0.12% to 32,601.78.
Commodity prices didn’t fare any better.
- Gold is down by 0.14% to $1,333.3;
- Brent crude oil is down by 1.54% to $68.28, and
- U.S. crude oil is down by 1.01% to $64.79.
Major Market Mover(s):
Overall risk aversion and anticipation of a dovish RBNZ decision this week dragged the high-yielding Kiwi lower across the board.
NZD/USD is down by 9 pips (-0.13%) to .7293;
NZD/JPY is down by 24 pips (-0.30%) to 80.18;
AUD/NZD is up by 23 pips (+0.21%) to 1.0870, and
GBP/NZD is up by 25 pips (+0.13%) to 1.9353.
The yen was set to be one of the biggest gainers of the session if not for BOJ officials peppering their Parliament testimonies with reassurances that they’ll stick to their easy policies for a while yet.
USD/JPY is down by 21 pips (-0.19%) to 109.94;
EUR/JPY is down by 25 pips (-0.18%) to 136.95;
GBP/JPY is down by 33 pips (-0.21%) to 155.18, and
AUD/JPY is down by 8 pips (-0.10%) to 87.16.
Watch Out For:
- 8:15 am GMT: Spain’s services PMI (55.2 expected, 54.6 previous)
- 8:45 am GMT: Italy’s services PMI (56.1 expected, 55.4 previous)
- 8:50 am GMT: France’s final services PMI to remain at 59.3?
- 8:55 am GMT: Germany’s final services PMI to retain 57.0 reading?
- 9:00 am GMT: Euro Zone’s final services PMI to remain at 57.6?
- 9:30 am GMT: Euro Zone’s Sentix investor confidence (33.2 expected, 32.9 previous)
- 9:30 am GMT: U.K. services PMI (54.1 expected, 54.2 previous)
- 10:00 am GMT: Euro Zone’s retail sales (-1.1% expected, 1.5% previous)