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U.S Dollar Sees Red again, with Asian Equities on the Bounce

Dollar woes continue as focus shifts away from inflation and monetary policy towards the current account and budget deficits. Economic data alone may not be enough for this Green back, especially when the U.S administration is ready to talk it down.
Bob Mason
us dollar

Earlier in the Day:

Economic data released through the Asian session this morning included January’s employment figures out of Australia and Japan’s finalized industrial production figures for December.

For the Aussie Dollar it was a mixed bag, with a 16k increase in employment, coming in ahead of a forecasted 15k increase. Whilst full employment fell by 49.8k, more than reversing December’s 12.7k increase, part time workers increased by 65.9k according to the ABS, leading to the increase in the employment number.

For the 12-months, full-time employment has increased by 293.2k, while part-time employment has increased by 110.1k.

Of some concern to the RBA may be the number of hours worked, which fell by 24.1m hours (-1.4%) to 1,708.2m hours between December 2017 and January 2017, which follows on from a 0.5% fall in December.

With the employment to population ratio holding steady at 62.0%, the unemployment rate fell from 5.6% to 5.5% in January.

The Aussie Dollar moved from $0.79264 to $0.79179 upon release of the data, the fall in full-time employment the negative this morning. In spite of the disappointing number, the Aussie Dollar was up 0.09% to $0.7933 at the time of writing, with a soft U.S Dollar, rising commodity prices and bounce in market risk appetite providing support.

Japan’s industrial production rose by 2.9% in December, according to finalized figures, an upward revision to the prelim 2.7% increase. The Yen was on the move again this morning, up 0.42% to ¥106.56 against the Dollar, with this morning’s finalized industrial production figures providing little direction.

Elsewhere, the Kiwi Dollar was up 0.1% to $0.7373 in what’s been a solid rebound from the late 2017 troubles coming off the back of the General Election result, though there’s still plenty of uncertainty over RBNZ monetary policy.

In the equity markets, Japanese equities were on the march in spite of a stronger Yen, with the Nikkei up 1.53% at the time of writing. With the Chinese markets closed for Chinese New Year, the Hang Seng closed out its half day with a 1.97% rally, while the ASX200 was up 1.19%, in response to the overnight moves in the U.S and a jump in commodity prices, supporting mining and resource stocks through the early part of the day.

The Day Ahead:

For the EUR, economic data is limited to finalized Spanish inflation figures for January and the Eurozone’s December trade figures.

Focus will be on the trade numbers, which will ultimately influence the finalized 4th quarter GDP figures and we will expect the numbers to be EUR neutral, with Germany’s narrowing of the trade surplus expected to have an impact.

At the time of writing, the EUR was up 0.06% to $1.2458, with direction through the day continuing to be in the hands of sentiment towards the Dollar, which has had a dire start to the year.

Across the Channel, it’s another quiet day for the Pound, with no material stats scheduled for release ahead of tomorrow’s retail sales figures that are forecasted to be a positive for the Pound and the UK economy.

Politics will be the area of focus through the day, with Brexit and talks of Boris Johnson resigning doing the rounds. Actual negotiations on Britain’s transition period terms and trade are scheduled to begin in March.

The main issue with regards to the terms of the transition is the EU’s demand for Britain to be subject to EU laws, including new ones that may be implemented during the transition period that Britain will have had no say on, not to mention an inability for Britain to determine its own regulations on trade with the rest of the world.

At the time of writing, the Pound was up 0.11% to $1.4015, with the softer Dollar offsetting all of the negative noise coming from the British government of late.

Across the Pond, macroeconomic data is on the heavier side this afternoon and includes manufacturing PMI numbers out of Philly and NY State, the weekly jobless claims figures, wholesale price inflation and January industrial production figures.

Focus will be on wholesale inflation, though we will expect the Dollar to respond to the full set of stats today, with the Dollar bulls in the need of some good news following the recent tumble.

At the time of writing, the Dollar was in the red again, down 0.26% to 88.893. Even this afternoon’s data may not be enough to save the Dollar from another day of declines, as sentiment over the budget and current account deficits take centre stage.

For the Loonie, this afternoon’s ADP nonfarm employment change number will be in focus, with the Loonie up just 0.03% to C$1.2489 at the time of writing.

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