- Market’s generally quiet but dollar rebounds a bit
- Aussie weakness continues
- Nikkei 0.32% Europe 0.32%
- Oil $104.50/bbl
- Gold $1272/oz.
- AUD Home Loans 1.8% vs. 2.3%
- JPY Industrial Production -0.3% vs. -0.2%
- EUR Euro-Zone Industrial Production -0.3% vs. =0.2%
- USD PPI 8:30
- USD U. of Michigan Confidence 9:55
Its been a very quiet night of trade in the currency market, with dollar rebounding a bit against most of the high beta currencies amidst a very empty economic calendar and ahead of a long weekend in Japan. The only story of note has been the persistent weakness in Aussie which managed to post fresh yearly lows against the Canadian and the New Zealand dollars.
FX
On the economic front Australian New Home Loans rose less than expected at 1.8% versus 2.3% eyed but investment lending for Homes actually rose to 1.5% from 0.9% the period prior. Despite the generally decent housing data, the Aussie continues to drift lower as it reels from yesterday’s disappointing unemployment data.
The labor markets in Australia are clearly signaling that the economic boom, led by the massive demand for resources from China is over and growth is likely to be markedly weaker in the foreseeable future. Investors therefore are worried that the RBA will continue to lower rates to spur demand and drive the AUD/USD exchange rate lower.
Despite the substantial depreciation in the Australian dollar over the past several months, the RBA still perceives the currency as overvalued and may target the 8500 level as it ultimate point of comfort. In the past week the Aussie has been able to stabilize ahead of the 9000 level, but Thursday’s labor data results have once again knocked it for a loop. If the dollar rebound resumes, the Aussie may be in for more selling with shorts eyeing the break of the 9000 level as the primary near term target.
Elsewhere the price action has been moribund with currencies essentially flat lining most of the night. The North American session may bring some life back to the market as traders focus on the PPI and the U of M releases.Wholesale inflation is expected to remain tame at 0.5% and U of M is forecast to improve modestly to 85 from 84.1 the period prior.
If consumer sentiment data surprises to the upside it could provide a modicum of support for the dollar rebound with USD/JPY possibly running towards 99.50 EUR/USD slipping back to 1.3000 and Aussie testing the support at the 9100 level as the trading week comes to a close.