Risk Sentiment the Key Driver for the USD, with U.S Stats Unlikely to Help

It looks like another choppy day ahead for the Dollar, with volatility in the equity markets and today’s data likely to weigh.
Bob Mason
bull and bear market

Earlier in the Day:

Economic data released through the Asian session included November employment, retail sales and industrial production figures and December inflation figures out of Japan.

For the Japanese Yen,

  • The job / applications ratio rose from 1.62 to 1.63, which was in line with forecasts, while the unemployment rate rose from 2.4% to 2.5% in November, which was worse than a forecasted hold at 2.4%.
  • Tokyo’s core consumer price index eased from 1% to 0.9% in December, year-on-year, according to prelim figures.
    • Prices for furniture and household utensils fell by 1.1% year-on-year, with prices for transportation and communication also weighing, down 0.7%.
    • Prices for clothes and footwear also weighed, with prices up just 0.4% year-on-year, softening from November’s 0.9%, prices falling by 1.7% month-on-month.
    • Month-on-month, the Tokyo core CPI saw inflation stall, while headline inflation also disappointed, with the annual rate of inflation coming in at just 0.3%, consumer prices falling by 0.3% month-on-month.
  • Retail sales rose by 1.4% in November year-on-year, coming up short of a forecasted 2.2%, following an upwardly revised 3% increase in October.
  • Industrial production fell by 1.1% in November, according to prelim figures, partially reversing October’s 2.9% rise, whilst coming in ahead of a forecasted 2.2% fall.
    • Industries that mainly contributed to the decrease were: 1) General-purpose and business orientated machinery; 2) electrical machinery and information and communication electronics equipment; and 3) electronic parts and devices.
    • Industries that mainly contributed to an increase were: 1) Production machinery; 2) chemicals (excl. inorganic, organic chemicals and medicine); and 3) Petroleum and coal products.

The Japanese Yen moved from ¥110.886 to ¥110.889 against the U.S Dollar upon release of the figures, before rising to ¥110.60 against the U.S Dollar, up 0.37% for the morning.

Elsewhere, the Aussie Dollar was up 0.24% to $0.7050, with the Kiwi Dollar up 0.16% to $0.6713, at the time of writing, rising commodity prices providing support off the back of Thursday’s rebound in the U.S session.

The Day Ahead:

For the EUR, economic data scheduled for release through the session includes finalized 3rd quarter GDP numbers out of Spain and prelim December inflation figures out of Spain and Germany.

On the data front, focus will be on the inflation numbers, barring a material revision to Spain’s GDP number, though direction through the day may ultimately be hinged on market risk sentiment, U.S futures pointing to another opening in the red this morning.

At the time of writing, the EUR was up 0.17% to $1.1450, with the inflation numbers and market risk sentiment to provide direction through the day.

For the Pound, it’s a quiet day ahead, with UK gross mortgage approvals the only numbers due out that will unlikely have a material impact on the Pound through the day.

At the time of writing, the Pound was up 0.16% to $1.2664, with direction through the day hinged on market risk appetite and the Dollar, the lack of chatter on Brexit leaving the Pound in pause mode for now.

Across the Pond, economic data scheduled for release includes November trade data and pending home sales figures, together with December’s PMI out of Chicago.

While an expected rebound in pending home sales would normally provide the Dollar with much needed support, focus will likely be the trade numbers and Chicago PMI, a marked slowdown in manufacturing activity in Philly and NY State raising some early red flags in spite of the FED Chair’s hawkish views on the economic outlook.

At the time of writing, the Dollar Spot Index was down 0.09% to 96.359, with today’s stats and any Oval Office chatter to provide direction through the day.

For the Loonie, it’s another quiet day on the data front, leaving the Loonie in the hands of the weekly EIA and API crude oil numbers out of the U.S, anything in line with or better than forecasted a positive for the Loonie.

The Loonie was flat at C$1.3619 against the U.S Dollar at the time of writing.

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