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Forex Flash: Bigger Run of weaker US data to weigh on dollar bloc – Westpac

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FXstreet.com (Barcelona) – There have been some notable misses on key US releases lately including US Q4 GDP, consumer confidence and the Chicago PMI. Westpac institutional banking has started to speculate whether or not we are in for a bigger run of weaker data: “Certainly it appears that a good part of the recent rise in our surprise index reflects a combination of several one-off positives that will soon wane” the team says.

Gauging what this all means for FX markets remains a tricky endeavour, the Westpac team noted: “For much of the last few years a broadly softer tone to the data has been a risk-off cue and a USD positive. But, now that the Fed has put the market on notice that the hurdle for another round of QE is not high markets might choose to look through weaker US data. Yet, softer numbers in recent sessions have clearly weighed on risk appetite.”

The most accurate conclusion the team projects is that there is significant downside risk for commodities and equities should the US continue to offer softer-than-expected fundamentals again, with clear negative implications for high beta risk currencies such as the dollar-bloc: “That risk is all the more elevated given some one-time positives arguably also boosted some Chinese and Eurozone data of late as well” they added.

By Ilya Spivak, Currency Strategist

Talking
Points

• US
  Dollar Corrects Lower as Asian Stocks Rise on Japanese,
  Australian Data
• Stock Index Futures
  Point to Upswing in Risk Appetite But Optimism is
  Suspect
• German Jobs Report
  Unlikely to be Market-Moving as Familiar Trends Hold

The
US Dollar
pulled back in overnight trade after a strong
showing over the preceding 24 hours that saw the greenback rise 0.3
percent on average against its leading counterparts as Asian stocks
rose, weighing on safe-haven demand. The MSCI Asia Pacific regional
benchmark index added 0.4 percent after
Japan’s
Manufacturing PMI
rose to show sector growth accelerated for a
second month in January while
Industrial
Production
topped expectations to add 4 percent in
December, marking the largest increase in 7 months. A gauge
of
Australian Business
Confidence
from NAB also improved, hitting the highest
level since May. The data set tempered fears that a slowdown in
Europe will dampen export demand and hurt growth prospects across
Asia.

Looking ahead,
stock index
futures
tracking key European and US exchanges are
pointing higher to suggest risk appetite remains well-supported and
arguing for continued losses for the safe-haven US currency.
Optimism’s durability appears suspect however. Indeed,
yesterday’s highly anticipated
EU leaders’
summit

proved
disappointing

on its most important objective –
defusing the near-term threat of a disorderly sovereign default
unleashing another worldwide credit crunch – as policymakers
put off finalizing the permanent ESM bailout fund and failed to
secure agreement on private-sector involvement (PSI) in the second
Greek bailout needed to secure near-term funding for the
debt-strapped nation. Some knee-jerk buoyancy is perhaps to be
expected considering EU officials did inch a bit closer toward the
longer-term objective of institutionalizing budgetary restraint
within the currency bloc, but the pick-up in sentiment seems highly
vulnerable to reversal.

On the data front,
German
Unemployment
figures headline the European calendar, with
expectations calling for the economy to add 10,000 jobs in January.
The unemployment rate is forecast to remain unchanged at 6.8
percent, a record low. While such an outcome certainly does not
amount to negative news, it likewise offers nothing particularly
new that has not had ample opportunity to be priced long ago.
Indeed, the German labor market has been steadily improving since
the second half of 2009, so barring a wild deviation from
expectations it seems unlikely that another small step in the same
direction is going to prove particularly market-moving.

Asia
Session
: What
Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Building Permits (MoM) (DEC)

2.1%

8.0%

-6.2% (R+)

23:15

JPY

Markit/JMMA Manufacturing PMI
(JAN)

50.7

-

50.2

23:30

JPY

Household Spending (YoY) (DEC)

0.5%

-0.1%

-3.2%

23:30

JPY

Jobless Rate (DEC)

4.6%

4.5%

4.5%

23:30

JPY

Job-To-Applicant Ratio (DEC)

0.71

0.70

0.69

23:30

AUD

RPData-Rismark House Px Raw
(DEC)

-1.2%

-

0.0% (R+)

23:30

AUD

RPData-Rismark House Px s.a.
(DEC)

-0.2%

-

0.4% (R+)

23:50

JPY

Industrial Production (YoY) (DEC
P)

-4.1%

-5.0%

-4.2%

23:50

JPY

Industrial Production (MoM) (DEC
P)

4.0%

3.0%

-2.7%

23:50

JPY

Loans Discounts Corp (YoY)
(DEC)

0.0%

-

-0.4%

0:01

GBP

GfK Consumer Confidence Survey
(JAN)

-29

-32

-33

0:30

AUD

NAB Business Confidence (DEC)

3

-

2

0:30

AUD

NAB Business Conditions (DEC)

1

-

1

0:30

AUD

Private Sector Credit (MoM)
(DEC)

0.3%

0.3%

0.3%

0:30

AUD

Private Sector Credit (YoY)
(DEC)

3.5%

3.6%

3.6% (R+)

2:00

NZD

Money Supply M3 (YoY) (DEC)

6.0%

-

6.5%

4:00

JPY

Vehicle Production (YoY) (DEC)

13.4%

-

4.5%

5:00

JPY

Annualized Housing Starts (DEC)

0.783

0.848M

0.845%

5:00

JPY

Housing Starts (YoY) (DEC)

-7.3%

-1.5%

-0.3%

5:00

JPY

Construction Orders (YoY) (DEC)

1.5%

-

21.0%

5:00

JPY

Small Business Confidence (JAN)

45.7

-

45.6

E
uro Session:
What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German Retail Sales (YoY) (DEC)

0.9%

0.8%

Medium

7:00

EUR

German Retail Sales (MoM) (DEC)

0.8%

-1.0%

Medium

7:00

CHF

UBS Consumption Indicator (DEC)

-

0.81

Low

8:55

EUR

German Unemployment Change (JAN)

-10K

-22K

High

8:55

EUR

German Unemployment Rate s.a.
(JAN)

6.8%

6.8%

Medium

9:00

EUR

Italian Unemployment Rate s.a. (DEC
P)

8.7%

8.6%

Low

9:00

EUR

Euro-Zone Services Confidence
(JAN)

-1.6

-2.1

Low

9:30

GBP

Mortgage Approvals (DEC)

54.0K

52.9K

Medium

9:30

GBP

Net Consumer Credit (DEC)

0.4B

0.4B

Low

9:30

GBP

Net Lending Sec. on Dwellings
(DEC)

0.8B

0.6B

Low

9:30

GBP

M4 Ex OFCs 3M Annualised (DEC)

-

3.7%

Low

9:30

GBP

M4 Money Supply (MoM) (DEC)

-

0.6%

Low

9:30

GBP

M4 Money Supply (YoY) (DEC)

-

-2.6%

Low

10:00

EUR

Euro-Zone Unemployment Rate
(DEC)

10.4%

10.3%

Medium

Critical
Levels

—
Written by
Ilya Spivak, Currency Strategist for

Dailyfx.com

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Original Article:
http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/01/31/FOREX_Dollar_on_the_Defensive_But_Selling_Pressure_Unlikely_to_Last.html

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