Australian Dollar Sold on Rate Cut Bets, Yen Down as Stocks Rise

DailyFX

The Australian Dollar fell as soft economic data drove bets on an interest rate cut this week. The Japanese Yen declined as risk appetite firmed.

Talking Points

  • Australian Dollar Falls as Retail Sales Miss, China PMI Boost RBA Rate Cut Bets
  • Yen Down as Asian Stocks Rally in the Wake of Friday’s US Employment Data
  • Thin Volumes to Make for Quiet Start to Trading Risk But Headline Risk High

The Australian Dollar underperformed in overnight trade, sliding as much as 0.5 percent against its leading counterparts, after a disappointing set of economic data reinforced the probability of an interest rate cut at tomorrow’s RBA policy meeting. Retail Sales unexpectedly fell 0.4 percent in March and the HSBC China PMI gauge fell to the lowest level since August 2011, warning of slowing performance in Australia’s largest export market.

The Japanese Yen slumped as Asian stocks advanced, sapping safe-haven demand and driving capital flows into carry traders funded in terms of the perennially low-yielding currency. The MSCI Asia Pacific regional benchmark equity index added 1 percent as investors responded to Friday’s better-than-expected US employment report. The Yen lost as much as 0.3 percent on average against the majors.

The economic calendar is fairly light in European trading hours, with markets seeming to shrug off minor revisions in April’s set of final Eurozone PMI figures. Trading was closed in Tokyo overnight and is likewise closed in London for a bank holiday, so trading volumes are likely to be relatively light. This coupled with the absence of scheduled US event risk may make for a quiet start to the trading week. Diminished liquidity may make for choppy and unusually volatile price action in the event that a stray headline spooks investors however.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

0:30

AUD

TD Securities Inflation (YoY) (APR)

2.1%

-

2.1%

0:30

AUD

TD Securities Inflation (MoM) (APR)

0.3%

-

0.2%

0:30

CNY

Leading Index (MAR)

99.38

-

99.98

1:30

AUD

Retail Sales s.a. (MoM) (MAR)

-0.4%

0.1%

1.3%

1:30

AUD

Retail Sales Ex Inflation (QoQ) (1Q)

2.2%

1.7%

0.1%

1:30

AUD

ANZ Job Advertisements (MoM) (APR)

-1.3%

-

-0.4%

1:45

CNY

HSBC Services PMI (APR)

51.1

-

54.3

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:45

EUR

Italian PMI Services (APR)

47.0 (A)

45.5

Low

7:50

EUR

French PMI Services (APR F)

44.3 (A)

44.1

Low

7:55

EUR

German PMI Services (APR F)

49.6 (A)

49.2

Medium

8:00

EUR

Euro-Zone PMI Services (APR F)

47.0 (A)

46.6

Medium

8:00

EUR

Euro-Zone PMI Composite (APR F)

46.9 (A)

46.5

Medium

8:30

EUR

Euro-Zone Sentix Investor Confidence (May)

-15.6 (A)

-17.3

Low

9:00

EUR

Euro-Zone Retail Sales (MoM) (MAR)

-0.1%

-0.3%

Medium

9:00

EUR

Euro-Zone Retail Sales (YoY) (MAR)

-2.2%

-1.4%

Medium

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3045

1.3171

GBPUSD

1.5503

1.5624

--- 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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