Talking Points:
Euro, Yen Rise as News-Flow from Jackson Hole Fuels Risk Aversion Anew
New Zealand Dollar Underperforms as Business Confidence Hits 6-Year Low
Eurozone CPI May Reveal Markets’ Outlook for ECB Policy Announcement
The Euro and the Japanese Yen outperformed in overnight trade as risk aversion swept financial markets anew. The slump in sentiment appeared to drive the unwinding of carry trades funded in the two low-yielding currencies.
The MSCI Asia Pacific regional benchmark stock index fell 0.6 percent as markets responded to news-flow emerging from the central bankers’ summit at Jackson Hole, Wyoming over the weekend. The prospect of tightening against a backdrop of global slowdown and market instability fears unnerved investors.
Federal Reserve Vice Chair Stanley Fischer hinted the FOMC may yet raise rates at next month’s policy meeting despite the recent slump in sentiment. BOE Governor Mark Carney also sounded hawkish, suggesting that rate increase considerations will enter the picture by year-end.
The risk-geared commodity bloc currencies understandably bore the brunt of eroding confidence in the G10 FX space. The New Zealand Dollar proved weakest on the session as dour economic data compounded sentiment-fueled selling. The ANZ Business Confidence gauge printed at -29.1 in August, the lowest since March 2009.
Looking ahead, the preliminary set of Augusts’ Eurozone CPI figures headlines the economic calendar. The core year-on-year inflation rate is expected to edge lower to 0.9 percent having hit a 15-month high at 1 percent in the prior month.
The markets’ response to the outcome may help illustrate investors’ mindset ahead of the ECB monetary policy announcement due later in the week. A soft print that weighs on the Euro may hint at building stimulus expansion bets, whereas a lackluster response would suggest traders expect Mario Draghi and company to remain on auto-pilot for now.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
22:45
NZD
Building Permits (MoM) (JUL)
20.4%
–
-3.3%
23:50
JPY
Loans & Discounts Corp (YoY) (JUL)
3.28%
–
2.74%
23:50
JPY
Industrial Production (MoM) (JUL P)
-0.6%
0.1%
1.1%
23:50
JPY
Industrial Production (YoY) (JUL P)
0.2%
0.8%
2.3%
00:30
AUD
TD Securities Inflation (MoM) (AUG)
0.1%
–
0.2%
00:30
AUD
TD Securities Inflation (YoY) (AUG)
1.7%
–
1.6%
01:00
AUD
HIA New Home Sales (MoM) (JUL)
-0.4%
–
0.5%
01:00
NZD
ANZ Activity Outlook (AUG)
12.2
–
19
01:00
NZD
ANZ Business Confidence (AUG)
-29.1
–
-15.3
01:30
AUD
Company Operating Profit (QoQ) (2Q)
-1.9%
-2.0%
-0.3%
01:30
AUD
Inventories SA (QoQ) (2Q)
0.0%
0.2%
0.6%
01:30
AUD
Private Sector Credit (MoM) (JUL)
0.6%
0.5%
0.4%
01:30
AUD
Private Sector Credit (YoY) (JUL)
6.1%
5.9%
5.9%
03:00
NZD
Money Supply M3 (YoY) (JUL)
9.3%
–
9.5%
04:00
JPY
Vehicle Production (YoY) (JUL)
-5.9%
–
-5.3%
05:00
JPY
Housing Starts (YoY) (JUL)
7.4%
11.0%
16.3%
05:00
JPY
Annualized Housing Starts (JUL)
0.914M
0.938M
1.033M
05:00
JPY
Construction Orders (YoY) (JUL)
-4.0%
–
15.4%
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
06:00
EUR
German Retail Sales (MoM) (JUL)
1.1%
-2.3%
Medium
06:00
EUR
German Retail Sales (YoY) (JUL)
1.7%
5.1%
Medium
07:00
CHF
KOF Leading Indicator (AUG)
100.3
99.8
Low
07:00
CHF
Total Sight Deposits (AUG 28)
–
463.4B
Low
07:00
CHF
Domestic Sight Deposits (AUG 28)
–
394.7B
Low
08:00
EUR
Italian Retail Sales (MoM) (JUN)
-0.2%
-0.1%
Low
08:00
EUR
Italian Retail Sales (YoY) (JUN)
–
0.3%
Low
09:00
EUR
Eurozone CPI Estimate (YoY) (AUG)
0.1%
0.2%
High
09:00
EUR
Eurozone CPI Core (YoY) (AUG A)
0.9%
1.0%
High
09:00
EUR
Italian CPI (MoM) (AUG P)
0.1%
-0.1%
Low
09:00
EUR
Italian CPI (YoY) (AUG P)
0.1%
0.2%
Low
09:00
EUR
Italian CPI – EU Harmonized (MoM) (AUG P)
-0.2%
-2.0%
Low
09:00
EUR
Italian CPI – EU Harmonized (YoY) (AUG P)
0.2%
0.3%
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.0909
1.1063
1.1124
1.1217
1.1278
1.1371
1.1525
GBPUSD
1.5176
1.5283
1.5337
1.5390
1.5444
1.5497
1.5604
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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