The US Dollar is facing selling pressure as a robust pick-up in risk appetite across financial markets weighs on haven demand but optimism appears highly fragile.
Talking Points
- US Dollar Corrects Lower as Asian Stocks Rise on Japanese, Australian Data
- Stock Index Futures Point to Upswing in Risk Appetite But Optimism is Suspect
- German Jobs Report Unlikely to be Market-Moving as Familiar Trends Hold
The US Dollar pulled back in overnight trade after a strong showing over the preceding 24 hours that saw the greenback rise 0.3 percent on average against its leading counterparts as Asian stocks rose, weighing on safe-haven demand. The MSCI Asia Pacific regional benchmark index added 0.4 percent after Japan’s Manufacturing PMI rose to show sector growth accelerated for a second month in January while Industrial Production topped expectations to add 4 percent in December, marking the largest increase in 7 months. A gauge of Australian Business Confidence from NAB also improved, hitting the highest level since May. The data set tempered fears that a slowdown in Europe will dampen export demand and hurt growth prospects across Asia.
Looking ahead, stock index futures tracking key European and US exchanges are pointing higher to suggest risk appetite remains well-supported and arguing for continued losses for the safe-haven US currency. Optimism’s durability appears suspect however. Indeed, yesterday’s highly anticipated EU leaders’ summitproved disappointing on its most important objective – defusing the near-term threat of a disorderly sovereign default unleashing another worldwide credit crunch – as policymakers put off finalizing the permanent ESM bailout fund and failed to secure agreement on private-sector involvement (PSI) in the second Greek bailout needed to secure near-term funding for the debt-strapped nation. Some knee-jerk buoyancy is perhaps to be expected considering EU officials did inch a bit closer toward the longer-term objective of institutionalizing budgetary restraint within the currency bloc, but the pick-up in sentiment seems highly vulnerable to reversal.
On the data front, German Unemployment figures headline the European calendar, with expectations calling for the economy to add 10,000 jobs in January. The unemployment rate is forecast to remain unchanged at 6.8 percent, a record low. While such an outcome certainly does not amount to negative news, it likewise offers nothing particularly new that has not had ample opportunity to be priced long ago. Indeed, the German labor market has been steadily improving since the second half of 2009, so barring a wild deviation from expectations it seems unlikely that another small step in the same direction is going to prove particularly market-moving.
Asia Session: What Happened
| GMT | CCY | EVENT | ACT | EXP | PREV |
| 21:45 | NZD | Building Permits (MoM) (DEC) | 2.1% | 8.0% | -6.2% (R+) |
| 23:15 | JPY | Markit/JMMA Manufacturing PMI (JAN) | 50.7 | - | 50.2 |
| 23:30 | JPY | Household Spending (YoY) (DEC) | 0.5% | -0.1% | -3.2% |
| 23:30 | JPY | Jobless Rate (DEC) | 4.6% | 4.5% | 4.5% |
| 23:30 | JPY | Job-To-Applicant Ratio (DEC) | 0.71 | 0.70 | 0.69 |
| 23:30 | AUD | RPData-Rismark House Px Raw (DEC) | -1.2% | - | 0.0% (R+) |
| 23:30 | AUD | RPData-Rismark House Px s.a. (DEC) | -0.2% | - | 0.4% (R+) |
| 23:50 | JPY | Industrial Production (YoY) (DEC P) | -4.1% | -5.0% | -4.2% |
| 23:50 | JPY | Industrial Production (MoM) (DEC P) | 4.0% | 3.0% | -2.7% |
| 23:50 | JPY | Loans & Discounts Corp (YoY) (DEC) | 0.0% | - | -0.4% |
| 0:01 | GBP | GfK Consumer Confidence Survey (JAN) | -29 | -32 | -33 |
| 0:30 | AUD | NAB Business Confidence (DEC) | 3 | - | 2 |
| 0:30 | AUD | NAB Business Conditions (DEC) | 1 | - | 1 |
| 0:30 | AUD | Private Sector Credit (MoM) (DEC) | 0.3% | 0.3% | 0.3% |
| 0:30 | AUD | Private Sector Credit (YoY) (DEC) | 3.5% | 3.6% | 3.6% (R+) |
| 2:00 | NZD | Money Supply M3 (YoY) (DEC) | 6.0% | - | 6.5% |
| 4:00 | JPY | Vehicle Production (YoY) (DEC) | 13.4% | - | 4.5% |
| 5:00 | JPY | Annualized Housing Starts (DEC) | 0.783 | 0.848M | 0.845% |
| 5:00 | JPY | Housing Starts (YoY) (DEC) | -7.3% | -1.5% | -0.3% |
| 5:00 | JPY | Construction Orders (YoY) (DEC) | 1.5% | - | 21.0% |
| 5:00 | JPY | Small Business Confidence (JAN) | 45.7 | - | 45.6 |
Euro Session: What to Expect
| GMT | CCY | EVENT | EXP | PREV | IMPACT |
| 7:00 | EUR | German Retail Sales (YoY) (DEC) | 0.9% | 0.8% | Medium |
| 7:00 | EUR | German Retail Sales (MoM) (DEC) | 0.8% | -1.0% | Medium |
| 7:00 | CHF | UBS Consumption Indicator (DEC) | - | 0.81 | Low |
| 8:55 | EUR | German Unemployment Change (JAN) | -10K | -22K | High |
| 8:55 | EUR | German Unemployment Rate s.a. (JAN) | 6.8% | 6.8% | Medium |
| 9:00 | EUR | Italian Unemployment Rate s.a. (DEC P) | 8.7% | 8.6% | Low |
| 9:00 | EUR | Euro-Zone Services Confidence (JAN) | -1.6 | -2.1 | Low |
| 9:30 | GBP | Mortgage Approvals (DEC) | 54.0K | 52.9K | Medium |
| 9:30 | GBP | Net Consumer Credit (DEC) | 0.4B | 0.4B | Low |
| 9:30 | GBP | Net Lending Sec. on Dwellings (DEC) | 0.8B | 0.6B | Low |
| 9:30 | GBP | M4 Ex OFCs 3M Annualised (DEC) | - | 3.7% | Low |
| 9:30 | GBP | M4 Money Supply (MoM) (DEC) | - | 0.6% | Low |
| 9:30 | GBP | M4 Money Supply (YoY) (DEC) | - | -2.6% | Low |
| 10:00 | EUR | Euro-Zone Unemployment Rate (DEC) | 10.4% | 10.3% | Medium |
Critical Levels
| CCY | SUPPORT | RESISTANCE |
| EURUSD | 1.3069 | 1.3309 |
| GBPUSD | 1.5663 | 1.5786 |
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak
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