The pair was facing significant challenges starting with China issues which are extending to commodities weakness as well. However the local data released this morning set off an AUD selloff which took the pair to a low of 0.897. The reading came in at -1% when the market was looking for a 0.2% rise while the previous reading was +3%. This reading has caught the market off-guard and resulted in the big slide. This will probably also have an impact on sentiment heading into tomorrow’s private capital expenditure numbers which are expected to be down 1.3%.
Yesterday I highlighted the pair has been stuck in a range for a while now, oscillating around the 0.90 mark which now seems to be perceived fair value. Focus will switch to China today where the currency weakness will continue to dominate trade. The CNY continued to weaken with talk of a widening of the USD/CNY trading band ramping up. There will continue to be concerns about whether or not this is a deliberate shift in FX policy towards a weaker yuan or perhaps curbing speculation.
Greenback struggles on mixed data
USD/JPY has found some stability just above 102 after having slid dramatically overnight as treasury yields retreated. US data in overnight trade was quite mixed, with the Case Shiller house price index in-line at 13.4%. The House price index was up 0.8% for the month, much better than the expected 0.4%. However, consumer confidence largely missed consensus along with the Richmond manufacturing index. US treasury yields were weaker, mostly as a result of the data. As a result the greenback remained subdued with traders reluctant to bid it higher. We are approaching the business end of the week on the data front, and this will put the pair into focus.
In the US later today we have new home sales due out and Fed member Pianalto speaks. This will be followed by core durable goods orders, unemployment claims and Fed chair Yellen’s testimony the next day. Over in Japan we’ll have weekly fund flows data tomorrow and the all-important CPI data on Friday.