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The USD is on the Back Foot as Risk Appetite Kicks in Ahead of Today’s Stats

Bob Mason
Optimism on trade and the Brexit delay supported risk appetite early on. Economic data out of the U.S will need to be good to reverse early losses.

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side once more. February Business PMI numbers out of New Zealand was the only major stat released in the early hours.

Outside of the numbers, the Bank of Japan’s March monetary policy decision was also there to consider.

For the Kiwi Dollar,

The Business PMI increased from 53.1 to 53.7 in February. According to the figures released by BusinessNZ,

  • The Production sub-Index rose from 51.3 to 53.9, with the New Orders sub-Index rising by 2.5 points to 54.7.
  • While there were increases across the finished stocks and deliveries sub-indexes, the employment sub-index fell by 1.2 points to 50.8.
  • The employment index fell to its lowest level since Aug-18, while the headline PMI hit the 2nd highest level in 9-months.

The Kiwi Dollar moved from $0.68239 to $0.68296 upon release of the figures. At the time of writing, the Kiwi Dollar stood at $0.6843, a gain of 0.29% for the session.

For the Japanese Yen,

The BoJ delivered its March monetary policy decision this morning. There were no surprises, with the BoJ holding rates steady at -0.1%.

While holding rates steady, the BoJ took a more dovish economic outlook. Joining a number of central banks the BoJ also noted rising overseas risks that could materially influence the economy.

BoJ Governor Kuroda had previously spoken of a willingness to deliver more easing should the need arise. Japan’s latest trade and industrial production painted a gloomy picture. The time may be rapidly approaching where the BoJ needs to become somewhat more inventive…

The Japanese Yen moved from ¥111707 to ¥111.571 upon release of the policy decision and policy statement. At the time of writing, the Japanese Yen was up 0.03% to ¥111.67 against the Dollar, with the BoJ Press Conference to come. Early support for the Yen came following news hitting the wires of North Korea planning to suspend nuclear talks with the U.S. The news was not enough to rattle appetite for riskier assets, however.

Elsewhere,

The Aussie Dollar was up by 0.24% to $0.7081. Risk-on sentiment through the early morning provided the upside for the Aussie Dollar and Kiwi Dollar. UK Parliament’s vote in favor of an extension to Article 50 and optimism over a U.S – China trade agreement provided support early on.

The Day Ahead:

For the EUR

Finalized annual headline and core inflation figures are due out of the Eurozone. The Eurozone’s monthly CPI numbers are also due out. With the data on the lighter side through the day, we can expect the EUR to respond to February’s month-on-month move in consumer prices. Forecasts are for a pickup in consumer prices, though for any support for the EUR, finalized figures would need to be in line with or better than prelims.

Outside the numbers, we can expect the markets to continue to respond to the UK parliament’s vote and chatter on U.S – China trade talks. The EUR made an early move off the back of the Brexit extension vote and optimism on trade.

At the time of writing, the EUR up 0.11% at $1.1316.

For the Pound

It’s yet another quiet day on the data front. With no material stats scheduled for release, it’s going to be another day of Brexit induced maneuvers.

Fortunately for the Pound, Parliament voted in favor of extending Article 50, with a majority of 211. The focus will now shift to whether there is any chance of the British PM getting her deal through at a 2nd time of asking. The timeline of the extension remains unclear, with next week’s vote on the deal to dictate whether an extended period of time is needed.

As things stand, Theresa May faces a tall order in getting her deal through. The in-house division saw a large number of Conservative MPs vote against the extension. The vast majority of the votes, in fact, came from the Labour Party.

At the time of writing, the Pound was down by 0.04% to $1.3237.

Across the Pond

It’s a busier day ahead on the economic calendar. In the early part of the afternoon, NY State manufacturing figures, and Industrial production figures are due out. JOLTs job openings and prelim March consumer sentiment figures are due out later in the day.

Following some disappointing NFP numbers released last week, we can expect the JOLTs job openings to have an impact alongside the consumer sentiment figures.

Of less influence will be the manufacturing numbers, though expect the Dollar to respond to any disappointing numbers.

At the time of writing, the Dollar Spot Index was down by 0.11% to 96.676.

For the Loonie

Manufacturing Sales figures are due out this afternoon. While forecasts are for a pickup in sales, following a 1.3% slide in December, any upside in the Loonie would likely be short-lived.

The IEA will release its monthly report later in the morning that will influence the direction of crude oil prices. Market risk sentiment will likely remain the key driver through the day, however.

The Loonie was up 0.17% at C$1.3312, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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