Asia market morning update - greenback strength

A mixed bag is expected across Asia this morning following the pullback in Wall Street and with the strong US dollar one to weigh across the board.

Source: Bloomberg

Data-support for the USD

The strong surge on Wednesday for the greenback had been one to open up further upsides as key resistances were broken. The US dollar index for one had broken past the resistance that had capped prices since Q3 2017. Two out of three pieces of data that would have supported the accumulation of greenback strength this week were seen on Wednesday. These were the Q1 Australia CPI and April German business confidence data, whereby weaker than expected readings saw to the dips in the AUD and EUR respectively. The last to seal the gains for the US dollar this week would be Friday’s first reading of US’ Q1 GDP whereby broad expectations for a beat of the low 2.1% quarter-on-quarter consensus had likely contributed in part to the US dollar strength. The partial pricing in of this expectation could mean that disappointments may tip prices back over again.

US Dollar Basket

Bank of Japan dovishness

For the near-term, however, one item that would be worth watching in this Thursday will be the Bank of Japan (BoJ) meeting which could pose a threat for the greenback strength. Weak economic data and outlook coupled with the lack of inflation remain the prevalent symptoms for the Japanese economy. With that, the expectation for the BoJ to lower its GDP and core CPI forecasts this meeting could imply a dovish bias that may set the yen for some appreciation in the upcoming session. USD/JPY had surged past the $112 level following months of suppression, though this could be a false break with the event of any turn that would also invite profit-taking ahead of the golden week holiday commencing after this Friday. Look to the meeting due some time in Asia mid-day timing according to past iterations and governor Kuroda’s press conference later in the afternoon.

One note on the EUR/USD, however, with the breaking lower of the currency pair firmly past the $1.12 level, there looks to be a renewal of the downtrend to follow.

EUR/USD Mini

Asia open

The breather seen in Wall Street on Wednesday following the record close earlier sets Asia markets up for a mixed commencement. As said above, the stronger US dollar would also be one to blanket Asia markets with some pressure into this Thursday session.

As seen from the overnight session, notable releases from the likes of Caterpillar yielded lowered share prices at the close, though this had mostly been a result of the concerns over market share rather than lowered demand from growth woes. After hours earnings from the likes of Facebook and Microsoft however saw to gains in their respective after-hours trade and likewise for US futures which could help to shore up some support for Asia markets into the session, perhaps one to watch here.

Meanwhile for the session ahead, a light data day is seen barring the BoJ meeting while the Australian and New Zealand market stays away for a market holiday.

Yesterday: S&P 500 -0.22%; DJIA -0.22%; DAX +0.63%; FTSE -0.68%


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