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USD: The main focus will be with the consumer confidence data at 14:00 GMT.   Last release saw the headline reading fall to 59.7, with the market looking for a small rebound to 61.0. Dollar has been more resilient to weaker US data recently, partly owing to weaker than expected readings in non-US data.

EUR: After the weaker survey data last week, focus on the German labour market numbers. Weakening here could further seal an ECB rate cut this week. Unemployment rate is seen steady at 6.9%. Eurozone inflation is expected softer from previous 1.7%.

Idea of the Day

On several fronts there are signs that the yen is turning around from the strong weakening trend seen so far this year.   We’ve not seen the exodus from domestic investors that was anticipated into overseas assets.

Indeed, they have been reducing them. Reports from investment banks suggest their client flows are less bearish towards the yen and the weekly CFTC data (which shows extent to which non-commercial futures traders are short/long) has shown yen short positions being reduced. And the options market is also suggesting (falling risk reversals) less bearishness in pricing.   All of these are merely snapshots, often of a small piece of the market, but all suggest that sentiment towards the yen is not as bearish as it once was.  For now, a push above 100 on USDJY is likely to prove elusive.

Latest FX News

JPY:  Yen strengthening into the European open, USDJPY moving below the 97.80 area. Data on jobless rate better than expected, falling to 4.1% from 4.3%.   Data on both retail sales and industrial production were weaker than expected at -0.3% YoY and -7.3% YoY respectively.

EUR:  There was a mild sense of relief on Monday in the wake of the Italian election results from the weekend, which saw Italian bond yields fall below 4% and EURUSD briefly nudge 1.31.   With German inflation data softer, expectations remain that the ECB could well cut rates this week.   EURUSD pushing above 1.31 as European market opened, but soon met with offers.

AUD:  There was an underlying buoyant tone to the Aussie in the early part of the week, with AUDUSD pushing to a high of 1.3058 on Monday. Private second credit growth numbers were in line with expectation, rising 3.2% YoY.