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Key Overnight Developments
- US Dollar Rebounds as Asian Stocks Slide on China Tightening Fears
- Japanese Data Points to Sagging Export Demand, Persistent Deflation
- Strong Australian Home Loans Data Fails to Boost Rate Hike Outlook
Critical Levels
CCY | SUPPORT | RESISTANCE |
EURUSD | 1.3095 | 1.3349 |
GBPUSD | 1.5592 | 1.5792 |
The Euro and the British Pound slid 0.3 percent apiece against the US Dollaras stocks fell in Asian trade amid fears of an imminent Chinese rate hike after authorities in Beijing bumped up the date for release of November’s inflation figures, boosting the safety-linked currency. The MSCI Asia Pacificregional benchmark index fell 0.9 percent, the most in two weeks. We have re-entered short EURUSDand remain long USDJPY.
Asia Session Highlights
CCY | GMT | EVENT | ACT | EXP | PREV |
JPY | 23:50 | Current Account Balance (YoY) (OCT) | 2.9% | - | 24.3% |
JPY | 23:50 | Current Account Total (Yen) (OCT) | 1436.2B | 1481.1B | 1959.8B |
JPY | 23:50 | Adjusted Current Account Total (Yen) (OCT) | 1462.6B | 1555.8B | 1661.3B |
JPY | 23:50 | Trade Balance - BOP Basis (Yen) (OCT) | 912.9B | 954.2B | 926.9B |
JPY | 23:50 | Bank Lending Banks Adjustments (YoY) (NOV) | -1.8% | - | -1.8% (R-) |
JPY | 23:50 | Bank Lending Banks ex-Trust (NOV) | -2.1% | - | -2.0% |
JPY | 23:50 | Bank Lending incl Trusts (YoY) (NOV) | -2.0% | - | -2.0% (R-) |
JPY | 23:50 | Japan Money Stock M2+CD (YoY) (NOV) | 2.6% | 2.7% | 2.7% |
JPY | 23:50 | Japan Money Stock M3 (YoY) (NOV) | 2.0% | 2.1% | 2.0% |
JPY | 23:50 | Machine Orders (MoM) (OCT) | -1.4% | -0.1% | -10.3% |
JPY | 23:50 | Machine Orders (YoY) (OCT) | 7.0% | 8.3% | 4.2% |
GBP | 0:01 | BRC Shop Price Index (NOV) | 2.0% | - | 2.2% |
AUD | 0:30 | Investment Lending (OCT) | 1.1% | - | 1.7% |
AUD | 0:30 | Value of Loans (MoM) (OCT) | 2.8% | - | 0.9% (R+) |
AUD | 1:30 | Home Loans (OCT) | 1.9% | 0.0% | 1.3% |
JPY | 4:30 | Bankruptcies (YoY) (NOV) | -6.3% | - | -9.9% |
JPY | 5:00 | Eco Watchers Survey: Current (NOV) | 43.6 | - | 40.2 |
JPY | 5:00 | Eco Watchers Survey: Outlook (NOV) | 41.4 | - | 41.1 |
Japan’s Current Account surplus narrowed to 1436.2 billion yen in October as export growth slowed for the eighth consecutive month, with overseas sales rising just 8.8 percent from the previous year to register the slowest expansion since October 2009. Meanwhile, Machine Orders dropped sharply more than economists expected, down 1.4 percent from the previous month. On the domestic front, Bank Lending dropped 2 percent, matching the fastest decline in over five years, while M3 Money Stock – the broadest measure of the money supply – expanded at the slowest annual pace in seven months. On balance, the data set points to withering foreign demand and a precarious situation at home as the money being pumped into the economy by the Bank of Japan through its various liquidity-boosting facilities is apparently not translating into growth-fueling borrowing or beating back deflationary pressure.
Australian Home Loans for owner-occupiers surged 1.9 percent, marking the largest increase in three months, while the value of those loans soared 2.8 percent, the most in over a year. While the result suggests that borrowers are withstanding the central bank’s aggressive rate hike campaign through the second half of 2009 and much of 2010, the outcome failed to meaningfully stoke expectations of additional tightening and offered little support for the Australian Dollar as the risk-correlated currencysold off amid broader risk aversion in overnight trade (see above). The Reserve Bank of Australia is still expected to deliver just one more rate hike over the next 12 months according to a Credit Suisse gauge of traders’ priced-in policy outlook.
Euro Session: What to Expect
CCY | GMT | EVENT | EXP | PREV | IMPACT |
EUR | 7:00 | German Exports s.a. (MoM) (OCT) | 0.0% | 3.0% | Low |
EUR | 7:00 | German Imports s.a. (MoM) (OCT) | 1.0% | -1.6% | Low |
EUR | 7:00 | German Current Account (euros) (OCT) | 14.3B | 14.0B | Medium |
EUR | 7:00 | German Trade Balance (euros) (OCT) | 15.1B | 16.8B | Medium |
EUR | 7:30 | Bank of France Business Sentiment (NOV) | 103 | 103 | Low |
EUR | 7:45 | French Central Government Balance (euros) (OCT) | - | -124.2B | Low |
EUR | 7:45 | French Trade Balance (euros) (OCT) | -4.2B | -4.7B | Low |
EUR | 11:00 | German Industrial Production nsa, wda (YoY) (OCT) | 10.0% | 7.9% | Medium |
EUR | 11:00 | German Industrial Production sa (MoM) (OCT) | 1.0% | -0.8% | Medium |
GBP | 11:00 | CBI Trends Total Orders (DEC) | -13 | -15 | Low |
Broad sentiment trends continue to dominate currency market price action, with sharp losses on US and European stock index futures ahead in late Asian trade pointing to continued risk aversion that promises to boost the safety-linked US Dollar against most of its counterparts. The reason du-jour for the selloff seems to be fear of an imminent Chinese rate hike (see above).
However, as we have argued for some weeks, the markets have faced an underlying tendency toward risk aversion since early November in the aftermath of the Federal Reserve’s QE2 announcement that delivered an asset-buying program matching priced-in expectations, robbing a four-month surge in risk appetite built around bets on renewed stimulus of the impetus to continue. With the temporary boost to confidence from a successful Irish budget vote now in the rearview mirror, that underlying tendency seems to be making a come-back and is likely to be sustained through the year-end.
On the data front, German Industrial Production is expected to add 1 percent from the previous month in October, pushing the annual growth rate higher for the first time in three months. However, the outcome may not prove particularly market-moving considering a pickup in manufacturing activity in October as well as November has been well-telegraphed in the more timely Purchasing Manager Indexfigures released a week ago. Furthermore, any optimism to be had from the outcome may be undermined as Current Account figures reveal that exports growth stalled in October.
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