The Japanese Yen outperformed in overnight trade as the Nikkei plunged in what appeared to be pre-positioning ahead of on-coming Fed-linked volatility.
Talking Points
Japanese Yen Outperforms as Markets Position for Volatile Week Ahead
British Pound May Rise on Mortgage Approvals, Follow-Through Limited
US Economic News-Flow May Set the Stage for Further US Dollar Selling
The Japanese Yen outperformed in otherwise quiet overnight trade, rising as much as 0.5 percent on average against its leading counterparts. The move closely tracked a drop in the benchmark Nikkei 225 stock index as eroding risk appetite encouraged an unwinding of carry trades funded cheaply in the perennially low-yielding currency. As we discussed earlier, the move seems to reflect protective profit-taking ahead of the volatility that is likely to surround the hefty dose of high-profile event risk due to cross the wires this week.
The economic calendar is relatively quiet in European hours, with June’s UK Mortgage Approvals data point amounting to the only somewhat noteworthy item on the docket. A slight pick-up to 59.7k is expected, putting approvals at the highest since March 2008. The release may be nominally supportive for the British Pound in that signs of strength in mortgage lending may discourage a dovish shift in Bank of England policy. Any move is likely to be short-lived however as traders focus on the policy announcement due later in the week for clues about the bank’s new “forward guidance” initiative.
The spotlight then promptly shifts to the US economic calendar, where June’s Pending Home Sales figure and the Dallas Fed Manufacturing Activity gauge will set the stage for a week focused on speculation surrounding the Fed’s intentions to “taper” the size of asset purchases through its quantitative easing (QE) effort. On the whole, US economic outcomes have returned somewhat lackluster resultsrelative to expectations over recent weeks. This keeps the door open for disappointing news-flow that undercuts the case for a near-term reduction in stimulus and applies further downward pressure on the US Dollar.
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Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
23:01
GBP
Hometrack Housing Survey (MoM) (JUL)
0.3%
–
0.4%
23:01
GBP
Hometrack Housing Survey (YoY) (JUL)
1.3%
–
0.8%
23:50
JPY
Retail Trade s.a. (MoM) (JUN)
-0.2%
0.8%
1.5%
23:50
JPY
Retail Trade (YoY) (JUN)
1.6%
2.1%
0.80%
23:50
JPY
Large Retailers’ Sales (YoY) (JUN)
3.5%
3.6%
-0.4%
3:30
JPY
BOJ’s Kuroda Speaks in Tokyo
–
–
–
5:55
CNY
Leading Index (JUN)
99.55
–
99.72
Euro Session:
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
8:00
EUR
Italian Business Confidence (JUL)
91.0
90.2
Low
8:30
GBP
Net Consumer Credit (JUN)
0.7B
0.7B
Low
8:30
GBP
Net Lending Sec. on Dwellings (JUN)
0.7B
0.3B
Low
8:30
GBP
Mortgage Approvals (JUN)
59.7K
58.2K
Medium
8:30
GBP
M4 Money Supply (MoM) (JUN)
0.2%
-0.1%
Low
8:30
GBP
M4 Money Supply (YoY) (JUN)
–
-0.1%
Low
8:30
GBP
M4 Ex IOFCs 3M Annualised (JUN)
4.4%
4.3%
Low
10:00
GBP
CBI Reported Sales (JUL)
10
1
Low
Critical Levels:
CCY
SUPPORT
RESISTANCE
EURUSD
1.3232
1.3300
GBPUSD
1.5324
1.5414
— 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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Source: Daily fx