Yen Drops on Alcoa Earnings But IMF May Offer Lifeline

DailyFX

The Japanese Yen fell as risk appetite firmed after earnings from Alcoa Inc beat expectations but may find renewed support in a dour IMF global economic outlook.

Talking Points

  • Yen Falls as Asian Stocks Rise After Alcoa Inc Q2 Earnings Top Expectations
  • S&P 500 Index Futures Point to Continued Risk-On Mood Heading into Europe
  • IMF Global Outlook Downgrade May Sour Sentiment, Offering Yen Support

The Japanese Yen underperformed in overnight trade, sliding as much as 0.4 percent against its top counterparts, as sentiment firmed around Asian stock exchanges. The MSCI Asia Pacific regional benchmark equity index added 1.5 percent in the wake a strong second-quarter earnings report from bellwether aluminum producer Alcoa Inc. The company reported earnings per share of $0.07 compared with $0.06 expected. S&P 500 futures are pointing higher, hinting at more of the same ahead.

A relatively thin set of scheduled data releases in European and US trading hours puts the spotlight on the publication of an updated set of global economic projections from the International Monetary Fund. Investors are likely to look at the report in terms of continued speculation about a reduction in Federal Reserve stimulus efforts against a backdrop of lingering recession in the Eurozone and mounting concerns about a slowdown in China.

In this environment, an IMF downgrade to global output expectations can feed worries that a Fed move to “taper” asset purchases will undermine the US economy’s ability to offset weakness elsewhere. Such an outcome has potential drive broader risk aversion, which may introduce renewed support for the Yen (if it were to materialize) amid an unwinding of carry trades funded in the low-yielding currency.

Separately, EU finance ministers are due to meet in Brussels, with progress on plans for the creation of a so-called “banking union” in the Eurozone tipped to be on the docket. Concrete policy proposals are not expected to emerge however, suggesting the Euro may not find lasting volatility in news-flow emerging from the sit-down. Meanwhile, UK Industrial Production is expected to have increased 0.2 percent in May while Trade Balance deficit widened to £8.49 billion.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

NZ Card Spending – Retail (MoM) (JUN)

1.1%

0.6%

0.7%

22:45

NZD

NZ Card Spending – Total (MoM) (JUN)

1.1%

-

0.7%

23:01

GBP

BRC Sales Like-For-Like (YoY) (JUN)

1.4%

1.9%

1.8%

23:01

GBP

RICS House Price Balance (JUN)

21%

8%

5%

23:50

JPY

Japan Money Stock M2 (YoY) (JUN)

3.8%

3.4%

3.5%

23:50

JPY

Japan Money Stock M3 (YoY) (JUN)

3.0%

2.9%

2.8%

0:00

NZD

QV House Prices (YoY) (JUN)

7.6%

-

7.1%

1:30

AUD

NAB Business Confidence (JUN)

0

-

-1

1:30

AUD

NAB Business Conditions (JUN)

-8

-

-4

1:30

CNY

Consumer Price Index (YoY) (JUN)

2.7%

2.5%

2.1%

1:30

CNY

Producer Price Index (YoY) (JUN)

-2.7%

-2.6%

-2.9%

6:00

JPY

Machine Tool Orders (YoY) (JUN P)

-12.4%

-

-7.4%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

EU-27 Finance Ministers Meet in Brussels

-

-

High

7:15

CHF

Retail Sales (Real) (YoY) (MAY)

1.8% (A)

3.3%

Low

8:30

GBP

Industrial Production (MoM) (MAY)

0.2%

0.1%

Medium

8:30

GBP

Industrial Production (YoY) (MAY)

-1.5%

-0.6%

Medium

8:30

GBP

Manufacturing Production (MoM) (MAY)

0.4%

-0.2%

Low

8:30

GBP

Manufacturing Production (YoY) (MAY)

-1.5%

-0.5%

Low

8:30

GBP

Visible Trade Balance (£, Mn) (MAY)

-8485

-8224

Medium

8:30

GBP

Trade Balance Non EU (£, Mn) (MAY)

-3480

-3414

Medium

8:30

GBP

Total Trade Balance (£, Mn) (MAY)

-2600

-2579

Medium

13:30

-

IMF Releases World Economic Outlook Update

-

-

High

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2827

1.2925

GBPUSD

1.4884

1.5032

--- 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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