GO Markets FX Analysis | U.S data aids taper trade; USDJPY breaks Y100

In a relatively quiet day in terms of data in the land down under, a surprisingly negative Australian Trade Balance did little to deter the Aussies rise in yesterday’s domestic session. The AUDUSD dropped by 19.2 pips to 91.56 US Cents quickly retracing to 91.87, even as the July trade balance came in at -$756M from the expected $100M figure.

Prior to the European open the Aussie was still sedentary around its 3-month highs at 91.5 US Cents with Kuroda announcing the Bank of Japan’s will retain the current base of monetary easing. USD/JPY hit above the 100.00 figure for the first time since late July not long after Kuroda’s conference as he reiterated that the BOJ “stood ready to inject further stimulus” to ensure a 2% inflation target won’t be affected.

Portugal’s hesitation on Wednesday’s positive Eurozone GDP figures was supported by German Factory Order’s disappointing numbers – coming in at 2.0%, below the 2.9% forecast. This confirmed Portugal noting that Exports for the quarter had only realistically grown from refined Petroleum sales within the region, and not a pickup in manufacturing exports.

This did little to faze the EURUSD heading into the Mario Draghi’s rate decision at 1.32 US Dollars. As expected, Draghi and Co kept rates on hold at 0.50%, with the Chairman expressing his lack of enthusiasm in a recent Euro recovery – which had little to no effect on the Euro.

Over the pond Europe’s Saxon neighbours at the Bank of England, aided by their fearless Caddie leader met to leave the Sterling Cash Rate at 0.50%, with no changes made to the bond buying program. The GBP/USD rejoiced after a week of dull manufacturing/industrial data to jump 47.7 pips higher at 1.566 US Dollars.

Crossing the Atlantic, into the New York session we saw ADP Unemployment come in around expectations at 176,000 however it was still under the recent pace of increases since April.

The flow of positive US data continued to support the Americans as AUD/USD sat for an average of 91.3 US Cents with Factory Orders & ISM Non-Manufacturing coming in higher than expected at -2.4% and 58.6. Weekly initial jobless claims came in at 323,000 or 7,000 less than expected, which now places significant pressure on Non-Farm Payrolls. Notwithstanding the peaks and troughs, the greenback has settled higher over the course of US trade.

Domestic releases on today’s docket include the AiG Construction Index, which will most likely signal that the bricks and mortar industry of Construction is still growing within a steady pace through August. At time of writing the AUD/USD sits at 91.2 US Cents.

This evening, Europe is relatively moot in data after a significantly heavy week on the pulse, across the pond the UK is likely to show little to no improvement in Manufacturing or Industrial production through July as the recession endures.

The Commodity bloc will be well represented again across the Atlantic with Canadian Unemployment Rate and change in employment figures for August released.

US Non-Farm Payrolls shape up as the signal for the ‘Septaper’ trade with an 180,000 plus figure needed to confirm that the Hawks, Doves, Owls & Seagulls will taper. The Fed’s Kocherlakota dried to calm the crowd as “a reduction in Fed bond buying may not mean as much as people think”.

The War Drums from Washington increases in decibels, as the Senate committee approves initial strikes and Russia intensifies its displeasure at international law being bypassed – much to the awkwardness of Obama and Putin at the G20 meeting.

Jordan Michaelides

Trading Desk