Risk sentiment was stable in Asian hours, with US stock futures trading broadly flat at the time of writing. In G10 FX the JPY was among the strongest currencies. According to Japan government adviser Itoh, the JPY is likely to appreciate due to very strong anti-deflation policies. However, when it comes to pairs such as USD/JPY, we believe that dips should still be bought.
The EUR has corrected higher of late. However, most of the upside was related to position squaring. Given the ECB’s aggressive policy stance and as the Fed is likely to keep investors’ rate expectations strongly supported, we anticipate new lows in EUR/USD soon.
In terms of data, the main focus was on Australia. Improving business confidence is regarded to indicate more constructive labour market conditions. Although the latest data has been keeping AUD downside limited, we expect rallies to remain a sell. Weak commodity price developments keep the risk of further slowing prices intact, regardless of better domestic growth prospects. Accordingly it cannot be excluded that the RBA will turn more dovish anew.
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