The Japanese Yen may face increasing selling pressure if US ISM manufacturing data tops expectations, boosting risk sentiment across financial markets.
Talking Points
Yen Drops on Japanese Deflation Deepens, US ISM Data May Amplify Pressure
British Pound Sinks as PMI Data Disappoints, Stoking BOE Stimulus Expectations
The Japanese Yen edged lower in Asian trade after January’s Consumer Price Indexfigures showed deeper deflation than economists expected, with the headline year-on-year measure showing a drop of 0.3 percent. The outcome reinforced hopes for a more aggressive stimulus push from the Bank of Japan after vocally dovish Asian Development Bank President Haruhiko Kuroda was formally nominated to take over as Governor yesterday. The Nikkei 225 benchmark stock index advanced, reinforcing downward pressure on the safety-linked currency.
Looking ahead, all eyes are on February’s US ISM Manufacturing gauge. Consensus forecasts point to print at 52.5 compared with 53.1 in the prior month, marking a slowdown in factory-sector activity. US economic releases have conspicuously improved relative to expectations since the beginning of last month (according to data from Citigroup). A similar result this time around may help to relieve fears about the onset of “sequester” government spending cuts due to trigger today and threatening to undermine the recovery. This will probably bode well for risk appetite, sinking carry-funding currencies like the US Dollar and Yen against their top counterparts. USDJPY itself seems likely to rise given the greenback’s slight yield advantage.
The British Pound is facing heavy selling pressure in early European trade in the wake of a disappointing Manufacturing PMI release. February’s report showed factory-sector activity unexpectedly contracted at the fastest pace in four months. Forecasters were penciling in a narrow acceleration in growth before the data crossed the wires. The outcome bolstered expectations of a dovish turn at the Bank of England, with Sterling sinking alongside UK 2-year bond yields. We continue to hold short GBPUSD.
Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
21:45
NZD
Terms of Trade Index (QoQ) (4Q)
-1.3%
1.4%
-3.2%
22:30
AUD
AiG Performance of Manufacturing Index (FEB)
45.6
–
40.2
23:00
AUD
RPData-Rismark House PX Actual (FEB)
0.3%
–
1.2%
23:30
JPY
National CPI (YoY) (JAN)
-0.3%
-0.2%
-0.1%
23:30
JPY
National CPI Ex-Fresh Food (YoY) (JAN)
-0.2%
-0.2%
-0.2%
23:30
JPY
National CPI Ex Food, Energy (YoY) (JAN)
-0.7%
-0.7%
-0.6%
23:30
JPY
Tokyo CPI (YoY) (FEB)
-0.9%
-0.6%
-0.5% (R+)
23:30
JPY
Tokyo CPI Ex-Fresh Food (YoY) (FEB)
-0.6%
-0.5%
-0.5%
23:30
JPY
Tokyo CPI Ex Food, Energy (YoY) (FEB)
-0.6%
-1.0%
-0.9%
23:30
JPY
Jobless Rate (JAN)
4.2%
4.2%
4.3% (R-)
23:30
JPY
Job-To-Applicant Ratio (JAN)
0.85
0.83
0.83 (R+)
23:30
JPY
Household Spending (YoY) (JAN)
2.4%
0.4%
-0.7%
23:50
JPY
Capital Spending (4Q)
-8.7%
-7.2%
2.2%
23:50
JPY
Capital Spending excl Software (4Q)
-7.2%
-6.5%
2.4%
23:50
JPY
Loans & Discounts Corp (YoY) (JAN)
1.34%
–
1.00%
1:00
CNY
Manufacturing PMI (FEB)
50.1
50.5
50.4
1:45
CNY
HSBC Manufacturing PMI (FEB)
50.4
50.6
52.3
5:00
JPY
Vehicle Sales (YoY) (FEB)
-12.2%
–
-12.9%
5:30
AUD
RBA Commodity Price Index (FEB)
91.1
–
88.0 (R-)
5:30
AUD
RBA Commodity Index SDR (YoY) (FEB)
-7.2%
–
-8.9% (R-)
Euro Session:
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
7:00
EUR
German Retail Sales (MoM) (JAN)
3.1% (A)
-2.1% (R-)
Medium
7:00
EUR
German Retail Sales (YoY) (JAN)
2.4% (A)
-3.7% (R+)
Medium
7:00
GBP
Nationwide House Prices s.a. (MoM) (FEB)
0.2% (A)
0.5%
Medium
7:00
GBP
Nationwide House Prices n.s.a. (YoY) (FEB)
0.0% (A)
0.0%
Medium
8:30
CHF
PMI Manufacturing (FEB)
50.8 (A)
52.5
Medium
8:45
EUR
Italian PMI Manufacturing (FEB)
45.8 (A)
47.8
Low
8:50
EUR
French PMI Manufacturing (FEB F)
43.9 (A)
43.6
Low
8:55
EUR
German PMI Manufacturing (FEB F)
50.3 (A)
50.1
Medium
9:00
EUR
Euro-Zone PMI Manufacturing (FEB F)
47.9 (A)
47.8
Medium
9:00
EUR
Italian Unemployment Rate s.a. (4Q)
11.2% (A)
10.6%
Low
9:00
EUR
Italian Unemployment Rate s.a. (JAN P)
11.7% (A)
11.2%
Low
9:30
GBP
PMI Manufacturing (FEB)
47.9 (A)
50.5 (R-)
Medium
9:30
GBP
Net Consumer Credit (JAN)
0.4B (A)
0.9B (R+)
Low
9:30
GBP
Net Lending Sec. on Dwellings (JAN)
0.1B (A)
0.9B (R-)
Low
9:30
GBP
Mortgage Approvals (JAN)
54.7K (A)
55.6K (R-)
Medium
9:30
GBP
M4 Money Supply (MoM) (JAN)
0.9% (A)
0.7%
Low
9:30
GBP
M4 Money Supply (YoY) (JAN)
-0.8% (A)
-1.0%
Low
9:30
GBP
M4 Ex IOFCs 3M Annualised (JAN)
5.6% (A)
3.9% (R+)
Low
10:00
EUR
Euro-Zone CPI Estimate (YoY) (FEB)
1.8% (A)
2.0%
High
10:00
EUR
Euro-Zone Unemployment Rate (JAN)
11.9% (A)
11.8% (R-)
Medium
11:00
EUR
ECB Announces 3-Year LTRO Repayment
–
–
High
11:00
EUR
Italian Annual GDP (2012)
-2.4% (A)
0.4%
Medium
11:00
EUR
Italian Deficit to GDP (2012)
3.0% (A)
3.9%
Medium
Critical Levels:
CCY
SUPPORT
RESISTANCE
EURUSD
1.3072
1.3177
GBPUSD
1.5097
1.5204
— Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak
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