Search ForexCrunch

Asian markets were mixed overnight as we kicked off another summer week. Japan’s Nikkei slipped 0.7%, due to some weaker than expected growth numbers, which fueled speculation that the Bank of Japan (BoJ) would need to step in with additional stimulative measures to drive growth. Meanwhile the Hang Sang and Australian ASX advanced 2.13% and 1.06% respectively, the move appeared to be on the back of gains made by Chinese resource and property development companies.

The Soft Japanese growth numbers and related concerns of further BoJ easing also put the Japanese Yen on its back foot. The USDJPY has pretty much taken back all of Friday’s losses as is closes in on 97.00 today. The Greenback starts the week broadly stronger with the Dollar Index trading up at 81.40 at the time of writing versus a close last week of 81.12.

Also surrendering ground to the Big Dollar overnight was the Euro, which versus the Greenback is currently testing support in the 1.3300 area. Broader USD strength plus soft equities in the Euro-area has helped lead the pair lower and leave the common currency at risk to additional losses. Some preliminary GDP numbers are slated for  Wednesday, and according to the Bloomberg consensus forecast, after almost 2-years of recession, the Euro-area is expected to report a small degree of growth. Conservative fiscal reforms from Spain & Italy, a recovery in the USA, and growth in Germany and France are all said to have contributed to the expected growth. While constructive, the EU is hardly out of the woods, unemployment in the youth sector remains above 20% however and meaningful economic expansion cannot occur until unemployment is under control.

Turing to the UK, the USDGBP popped up over its 200-day moving average in the mid-1.5400 handle last week, but in light of USD strength overnight is testing back lower towards that level today. Rumours of large option expires at 1.5450 & 1.5500  tomorrow  could have a magnetic effect on the pair in the thin summer trading environment.

While the American Federal Budget is slated for today, it is unlikely to be market moving. Given the lack of meaningful data and relatively quiet overnight session, expectations are for a fairly quiet North American session today. Off the charts USDCAD is mildly stronger this morning as it retraces some of Friday’s losses. The move is in line with broader market trends and the pair simply looks to be taking its cue from the rest of the market.

While today is lite on the data release side for the Americas, the rest of the week will be quite different. There is some kind of meaningful economic data out of the US every day for the rest of the week.  Tomorrow  has Retail Sales on the docket. According to a poll done by Reuters, expectations are for 0.3%. As has been mentioned previously, the frenzy surrounding the Fed and a September Taper means that markets will be watching all of this week’s data with keen interest. In the current environment of thin summer trading the possibility of elevated volatility is increased. Contact your hedging specialist to discuss what this could mean for you.

Further reading:

EUR/USD Aug. 12 – Pressured after failing to break higher; Greek speculation weighs

Sterling on the rise; What to expect this week? Weekly Overview (05 – 09/08/2013)