Currency Traders Seem Confused On Thursday Morning

Barry Norman

Asian currencies are trading mixed this morning as forex traders are looking towards the Bank of England “Super Thursday” and tomorrow’s nonfarm payroll report. Focus remains tuned into every the possibilities of the Federal Reserve interest rate increase either in September or December. It seems that everyone is asking the same question “How Will This Effect The Fed Decision?” Traders are bolstering bets the Federal Reserve will raise interest rates before the year is out as the economy appears firmly in recovery mode. Interest-rate futures showed the chances of a Federal Reserve rate increase next month reached 48 percent Thursday, up from 38 percent earlier this week.

The Aussie tumbled this morning after a mixed employment data reports.  The market isn’t quite sure how to view Australia’s labour market report for July, as a surprisingly large jump in the unemployment rate competes with encouraging jobs growth and a growing labour force set against lower than expected population growth. The unemployment rate jumped to 6.3% from a revised 6.1%, which is a far cry from the 6.1% the market was expecting, and the economy added an impressive 38.5K jobs over the month. The Aussie fell to 0.7332 giving up 24 points.

Across the ocean the tiny island of New Zealand saw its currency move in the opposite direction with the kiwi climbing to 0.6542 adding 29 points. The kiwi has also been under pressure as slumping global milk prices prompted the Reserve Bank to embark on looser monetary policy in June, and this week’s latest decline caused local economists to downgrade their expectations for Fonterra Cooperative Group’s forecast payout to farmers to below $4 per kilogram of milk solids.

Also in the Asian theater the Japanese yen gained against the dollar and the euro as traders begin to anticipate the Bank of Japan decision tomorrow. There was no data from Japan this morning.  The USDJPY dipped 14 points from its recent high to trade at 124.73 as the US dollar remained near recent highs at 97.90. The euro traded at 136.08 against the yen. Investors continued to review the situation in Greece weighing on the euro as the Greek stock markets continues to fall and Greek bank stocks hit rock bottoms.

The Japanese yen is trading at multi-year lows versus the US dollar and sterling. Its depreciation has been more pronounced over the past year, spurred by the Bank of Japan’s (BoJ) additional stimulus in October 2014, when the central bank surprised the market by announcing an expansion of its asset purchase program to an annual pace of 80 trillion yen.  The market has been skeptical for good reasons. Japan’s economy has struggled to make meaningful improvements since it bounced back from recession late last year, leading the BoJ to push back the timeframe of meeting its inflation target from the fiscal year 2015 to 2016.

With additional BoJ stimulus unlikely in the foreseeable future, we believe that the trend of yen weakness, which has been closely aligned to the central bank’s quantitative and qualitative easing policies, has run its course in the near term. Financial Times this morning offered this interesting graphic that I decided to share with you.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.