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The Aussie and the EURO Hit the Brakes as the Pound Makes Its Move

Bob Mason
Inflation picks up in Tokyo, but still no where near the BoJ’s target, while the Aussie Dollar faces more pressure, with the EUR also under the cosh.

Earlier in the Day:

Economic data released through the Asian session this morning was limited to January inflation numbers out of Japan.

For the Japanese Yen, core consumer prices in the Ku-area of Tokyo rose by 1.1% in January, coming in ahead of a forecasted and December 0.9%, according to prelim figures.

  • A fall in prices for furniture and household utensils (-0.4%) and transportation and communication (-0.6%) continued to drag in January, while the rate of decline eased from the previous month.
  • Providing support for the pickup in inflationary pressure was a 7.1% jump in prices for fuel, light and water charges, a 2.3% rise in prices for culture and recreation and a 1.2% rise in prices for medical care.
  • Prices for clothes and footwear rose by 0.9%, picking up from a 0.4% rise in December.
  • Prices for goods fell by 0.2% year-on-year, while prices for services rose by 0.9%, the slide in goods largely attributed to a 1.7% slide in prices for food that are excluded from the core figures. (Tokyo consumer prices rose by just 0.4% in January, year-on-year).
  • Month-on-month, core consumer prices for the Ku-area rose by 0.2%

The Japanese Yen moved from ¥109.544 to ¥109.549 against the U.S Dollar, upon the release of the numbers, before easing to ¥109.72 at the time of writing, down of 0.07% for the session.

While there were no stats out of Australia, the Aussie Dollar remained under pressure, down 0.2% to $0.7080. Thursday’s employment numbers were of little consolation as the markets continue to respond to the NAB’s announcement of a hike to its standard variable mortgage rate for owner-occupiers. With ballooning household debt and tepid wage growth, the latest move has raised expectations of an RBA rate cut to counter the impact on consumers.

Elsewhere, the Kiwi Dollar was also in the red, down by 0.18% to $0.6751 at the time of writing, with pressure coming off the back of concerns over economic growth following this week’s downgrades and a string of weak stats.

The Day Ahead:

For the EUR, it’s a quieter day on the data front, with key stats scheduled for release limited to business sentiment figures out of Germany.

Following the IMF’s growth forecast downgrades early on the in the week, which included downgrades to Germany’s growth forecasts, the German government downgraded its growth forecast for 2019 to 1%, down from the previous quarter’s 1.8% forecast.

With ECB President Draghi also taking a more dovish outlook on growth, we can expect the EUR to be more sensitive than normal to today’s figures, particularly in the wake of the prelim manufacturing PMI numbers out of Germany on Thursday, which reported a contraction in the sector. Forecasts are EUR negative, with optimism across the private sector coming in at the 2nd lowest seen in the past 4-years, according to the prelim PMI report released on Thursday.

At the time of writing, the EUR was up 0.04% to $1.1308, with today’s stats and risk sentiment the key drivers through the day.

For the Pound, economic data is limited to mortgage approval figures that are unlikely to have a material bearing through the day. Focus will remain on Brexit chatter and, with the chances of a no-deal departure diminishing further, the upward momentum remains ahead of next week’s plan B vote.

At the time of writing, the Pound was up 0.28% to $1.3103, with updates on Brexit the key driver through the day.

Across the Pond, economic data scheduled for release includes durable goods orders and new home sales, with both sets of numbers likely to have an impact on the Dollar, new home sales expected to garner more attention following the slide in existing home sales in December.

Outside of the numbers, chatter from the Oval Office and Capitol Hill will continue to influence, the government shutdown seeing no end following the Thursday vote.

At the time of writing, the Dollar Spot Index was down 0.09% to 96.513.

For the Loonie, it’s another quiet day on the economic data front, leaving the Loonie back in the hands of market risk appetite and the direction of crude oil prices through the day.

While we can expect today’s rig count figures out of the U.S to provide direction, concerns over growth and ultimately demand on crude will likely overshadow the effects of any fall in rig counts.

The Loonie was down 0.03% to C$1.3354 against the U.S Dollar at the time of writing.

This article was originally posted on FX Empire