The US Dollar and Japanese Yen are likely to fall if February’s US jobs report tops expectations, boosting risk appetite across financial markets.
Talking Points
Dollar to Fall with Japanese Yen if US Jobs Data Surprises to the Upside
Chinese Exports Soar, Fueling Risk Sentiment Rise in Asian Trading Hours
All eyes are on February’s US Employment report through the end of the trading week. Consensus forecasts suggest the economy added 165,000 jobs in February, a print broadly in line with the 12-month trend average of 168,000 that ought not to offer much fuel for volatility around financial markets. US economic data has markedly improved relative to expectations since early February however, leaving the door open for an upside surprise.
Such an outcome stands to boost hopes for the resilience of US economic recovery in the face of strengthening fiscal headwinds following the triggering of “sequester” spending cuts last week. That may boost market-wide risk sentiment. Following the removal of the specter of rate cuts following the RBA rate decision earlier this week, such an outcome stands to boost the Australian Dollar as traders flock to the highest yields in the G10 FX space. The Japanese Yen looks vulnerable in this scenario as traders look to finance carry trades in the perennially low-yielding currency. In the context of a recommitment to loose monetary policy from Fed Vice Chair Janet Yellen, a similar fate threatens the US Dollar.
The Yen slumped in overnight trade as risk appetite firmed in Asia, pushing stocks higher and encouraging capital flows into yield-seeking trades at the expense of the go-to funding unit. The MSCI Asia Pacific regional benchmark equity index added 0.7 percent after US Jobless Claims unexpectedly fell and Chinese Exports soared, posting a dramatic 21.8 percent year-on-year increase in February compared with a paltry 8.1 percent increase expected by economists. The reports hinted at firming growth outlooks in the world’s top-two economies and underpinning optimism in regional demand prospects.
Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
21:45
NZD
Manufacturing Activity (4Q)
0.0%
–
1.7% (R+)
21:45
NZD
Manufacturing Activity Volume s.a. (QoQ) (4Q)
1.5%
–
2.5% (R-)
23:00
NZD
QV House Price (YoY) (FEB)
6.3%
–
6.2%
23:50
JPY
Gross Domestic Product (QoQ) (4Q F)
0.0%
0.1%
-0.1%
23:50
JPY
Gross Domestic Product Annualized (4Q F)
0.2%
0.2%
-0.4%
23:50
JPY
Nominal Gross Domestic Product (QoQ) (4Q F)
-0.3%
-0.3%
-0.4%
23:50
JPY
Gross Domestic Product Deflator (YoY) (4Q F)
-0.7%
-0.6%
-0.6%
23:50
JPY
Current Account Total (¥) (JAN)
-364.8B
-611.5B
-264.1B
23:50
JPY
Adjusted Current Account Total (¥) (JAN)
364.6B
112.2B
114.7B (R+)
23:50
JPY
Trade Balance – BOP Basis (¥) (JAN)
-1479.3B
-1512.3B
-567.6B
23:50
JPY
Current Account Balance (YoY) (JAN)
-19.9%
31.0%
-199.4%
23:50
JPY
Bank Lending Banks ex-Trust (FEB)
1.9%
–
1.6%
23:50
JPY
Bank Lending incl Trusts (YoY) (FEB)
1.5%
–
1.3%
2:00
CNY
Exports (YoY) (FEB)
21.8%
8.1%
25.0%
2:00
CNY
Imports (YoY) (FEB)
-15.2%
-8.5%
28.8%
2:00
CNY
Trade Balance ($) (FEB)
$15.25B
-$6.90B
$29.15B
4:30
JPY
Bankruptcies (YoY) (FEB)
-11.8%
–
-5.2%
5:00
JPY
Eco Watchers Survey: Outlook (FEB)
57.7
–
56.5
5:00
JPY
Eco Watchers Survey: Current (FEB)
53.2
–
49.5
5:00
JPY
BOJ Monthly Economic Report (MAR)
–
–
–
Euro Session:
GMT
CCY
EVENT
EXP
PREV
IMPACT
8:15
CHF
Consumer Price Index (MoM) (FEB)
0.3%
-0.3%
Medium
8:15
CHF
Consumer Price Index (YoY) (FEB)
-0.3%
-0.3%
Medium
8:15
CHF
CPI – EU Harmonised (MoM) (FEB)
–
-0.5%
Low
8:15
CHF
CPI – EU Harmonised (YoY) (FEB)
–
-0.1%
Low
9:30
GBP
BoE/GfK Inflation Next 12 Mths (FEB)
–
3.5%
Low
11:00
EUR
German Industrial Production (YoY) (JAN)
-1.2%
-1.1%
Medium
11:00
EUR
German Industrial Production (MoM) (JAN)
0.4%
0.3%
Medium
11:00
EUR
ECB to Announce Weekly 3yr LTRO Repayment
–
–
High
Critical Levels:
CCY
SUPPORT
RESISTANCE
EURUSD
1.3009
1.3162
GBPUSD
1.4960
1.5076
— 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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