The rout on the Wall Street overnight translated into heightened risk-aversion on the Asian stocks, which fell as much as 3.5% in early trades before the bears took a breather. Amongst the Asia-pac currencies, the Yen jumped on increased safe-haven demand, knocking-off USD/JPY to 111.80 level. The declines in the Treasury yields dragged the US dollar broadly lower, which further added to the downside in the spot. But the bulls quickly managed to regain the 112 handle, where it now consolidates.
The AUD/USD stood resilient to the risk-off sentiment and bounced-back towards the 0.7100 level, as the Aussie found support from a weaker USD and affirmation of Australia’s AAA credit rating by Fitch announced earlier today. The Kiwi traded marginally lower near 0.6520 region amid dismal New Zealand’s trade figures and oil-price weakness. Meanwhile, gold prices on Comex hit three-month tops near $ 1240, as risk-off remains at full steam.
Both the EUR and GBP attempted a modest recovery, but the markets remain cautious heading into the European Central Bank (ECB) monetary policy decision while the Italian budget woes and Brexit headlines will continue to remain in the spotlight.
Main topics in Asia
NZ trade: Fruits of our labour – ANZ
Fitch affirms Australia at AAA with a stable outlook
Chinese steel wheels getting dumped in the US – Reuters
UK Brexit backstop offer ‘strange’ – Ireland’s Varadkar
BOJ’s Wakatabe: central banks must be vigilant and prepared for future financial crisis
US 10-year treasury yield hits three-week lows
BOC’s Poloz: Our model now has 50% more interest rate sensitivity in it than historically
S. Korea FinMin Kim Dong-yeon: Achieving 2.9% growth may not be easy
Key Focus ahead
Thursday’s EUR macro calendar headlines the key ECB monetary policy decision and President Draghi’s speech at the press conference. Markets brace for downside risks to the EUR, as Draghi could highlight the European political turbulence and weaker fundamentals. However, the ECB is likely to maintain its stance on the conclusion of QE later this year.
Apart from the ECB event, the German Ifo survey will be eyed for near-term trading impetus. The UK docket remains absolutely data-dry. In the NA session, the US weekly jobless claims, durable goods, goods trade balance and pending home sales data will be reported ahead of the speech by the FOMC members Clarida and Mester.
EUR/USD: On the defensive below 76.4% Fib ahead of the ECB
The EUR/USD is on the defensive ahead of the ECB rate decision. The drop toward August lows may not materialize if the ECB downplays risk aversion and Italy concerns and reiterates commitment to end the QE program in December.
GBP/USD struggling underneath 1.2900 as Brexit headlines continue to disappoint
Thursday is completely clear of UK data on the economic calendar, and traders will have no choice but to continue focusing on Brexit headlines, which have taken a turn for the bearish recently.
Day ahead: plenty of action to come in Europe – Rabobank
Analysts at Rabobank explained that today we have lots of data with UK retail sales, the German IFO survey, and US durable goods orders.
ECB Preview: Draghi set to play risks down and keep the path of QE ending in December clear
The ECB is unlikely to alter its path of gradual removal of the economic support in form of scaling the asset purchasing program down with the definite end in December.
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