Yen Sinks as Fed Officials Talk Down QE Reduction Bets

The Japanese Yen sank amid a recovery in risk appetite in Asia after Fed officials poured cold water on QE reduction expectations. More of the same is hinted ahead.

 

The Japanese Yen underperformed in overnight trade, down as much as 0.8 percent on average against its top counterparts, as swelling risk appetite buoyed demand for carry trades funded in the perennially low-yielding currency. The MSCI Asia Pacific regional benchmark stock index rose 2 percent as investors cheered on comments from New York Fed President Bill Dudley and Fed Governor Jerome Powell that poured cold water on stimulus reduction bets.

Dudley said QE may be prolonged as-is if the economy falls short of the central bank’s outlook, adding growth may “diverge significantly” from the FOMC forecast. Powell added that the timing for reducing asset purchases is “in no way” predetermined. Commodity prices likewise tracked higher as traders greeted the possibility that Fed support may not be withdrawn as quickly as previously expected. Cycle-sensitive crude oil prices followed shares higher while gold and silver edged higher as the prospect of longer-lasting QE stabilized anti-fiat demand.

S&P 500 futures are pointing firmly higher in early European trade, pointing to more of the same through the end of the trading week. The preliminary set of June’s German CPI figures headlines the economic calendar. Expectations suggest the headline inflation rate rose to 1.7 percent, a five-month high. The result may weigh on the probability for expanded ECB stimulus in the minds of investors and boost the Euro, where prices have been tracking closely in line with the front-end yield spread (a gauge of the markets’ monetary policy outlook). Comments from Fed Governor (and sitting FOMC member) Jeremy Stein headline the day’s speaking schedule.

Capitalize on Shifts in Market Mood 

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Building Permits (MoM) (MAY)	1.3%	-3.9%	21.0%
23:05	GBP	GfK Consumer Confidence Survey (JUN)	-21	-21	-22
23:15	JPY	Nomura/JMMA Manufacturing PMI (JUN)	52.3	-	51.5
23:30	JPY	National CPI (YoY) (MAY)	-0.3%	-0.4%	-0.7%
23:30	JPY	National CPI Ex-Fresh Food (YoY) (MAY)	0.0%	0.0%	-0.4%
23:30	JPY	National CPI Ex Food, Energy (YoY) (MAY)	-0.4%	-0.3%	-0.6%
23:30	JPY	Household Spending (YoY) (MAY)	-1.6%	1.3%	1.5%
23:30	JPY	Jobless Rate (MAY)	4.1%	4.0%	4.1%
23:30	JPY	Job-To-Applicant Ratio (MAY)	0.9	0.9	0.89
23:30	JPY	Tokyo CPI (YoY) (JUN)	0.0%	0.1%	-0.2%
23:30	JPY	Tokyo CPI Ex-Fresh Food (YoY) (JUN)	0.2%	0.2%	0.1%
23:30	JPY	Tokyo CPI Ex Food, Energy (YoY) (JUN)	-0.4%	-0.3%	-0.3%
23:50	JPY	Industrial Production (MoM) (MAY P)	2.0%	0.2%	0.9%
23:50	JPY	Industrial Production (YoY) (MAY P)	-1.0%	-2.4%	-3.4%
23:50	JPY	Large Retailers' Sales (MAY)	-0.4%	0.2%	-2.3%
23:50	JPY	Retail Trade s.a. (MoM) (MAY)	1.5%	0.7%	0.6%
23:50	JPY	Retail Trade (YoY) (MAY)	0.8%	0.0%	-0.2%
1:30	AUD	Private Sector Credit (MoM) (MAY)	0.3%	0.3%	0.3%
1:30	AUD	Private Sector Credit (YoY) (MAY)	3.0%	2.9%	3.1%
1:35	CNY	MNI Flash Business Sentiment Indicator (JUN)	53.7	-	56.7
3:00	NZD	Money Supply M3 (YoY) (MAY)	6.2%	-	6.5%
4:00	JPY	Vehicle Production (YoY) (MAY)	-6.2%	-	-6.5%
5:00	JPY	Housing Starts (YoY) (MAY)	14.5%	6.1%	5.8%
5:00	JPY	Annualized Housing Starts (MAY)	1.027M	0.950M	0.939M
5:00	JPY	Construction Orders (YoY) (MAY)	26.0%	-	2.0%

Euro Session:

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
6:00	EUR	German Retail Sales (YoY)	0.4% (A)	2.7%	Medium
6:00	EUR	German Retail Sales (MoM)	0.8% (A)	-0.1%	Medium
6:00	GBP	Nationwide House Prices s.a. (MoM)	0.3% (A)	0.4%	Medium
6:00	GBP	Nationwide House Prices n.s.a. (YoY)	1.9% (A)	1.1%	Medium
7:00	CHF	KOF Swiss Leading Indicator	1.16 (A)	1.1	Medium
8:30	GBP	Index of Services (MoM)	0.1%	0.2%	Low
8:30	GBP	Index of Services (3Mo3M)	1.1%	0.6%	Low
12:00	EUR	German CPI (MoM) (JUN P)	0.0%	0.4%	High
12:00	EUR	German CPI (YoY) (JUN P)	1.7%	1.5%	High
12:00	EUR	German CPI - EU Harmonised (MoM) (JUN P)	0.1%	0.3%	Low
12:00	EUR	German CPI - EU Harmonised (YoY) (JUN P)	1.8%	1.6%	Low

  Critical Levels:

CCY	SUPPORT	RESISTANCE
EURUSD	1.3006	1.3089
GBPUSD	1.5192	1.5336