Yen unwinds as risk improves

The main theme in the FX space was a reversal in recent yen strength as the Syria situation somewhat calmed, with some reports downgrading the threat of a strike from imminent to measured.

USD/JPY printed a low of ¥96.82 in Asian trade yesterday but managed to reverse to a high of ¥97.84. The pair is threatening to push higher in Asia as we approach the business end of the week for Japan data. This morning we have received some disappointing retail sales data for Japan (-0.3% vs 0.0% expected). Perhaps the lack of improvement helps pile pressure on Japanese officials to act and weaken the yen. We also have CPI, industrial production and jobs data due out tomorrow. With inflation being the key ingredient for Abenomics, the CPI data certainly deserves some attention.

Risk currency pairs also managed to recover, with AUD/USD trading back above $0.89 after having printed a low of $0.889. The pair is now trading at around $0.895 ahead of the private capital expenditure numbers at 11:30 AEST. Given the recent slump in mining investment, this reading deserves some attention as it reveals capex spending during Q2. The data will also reveal spending intentions for FY14 and this is likely to carry more weight. The market is looking for a flat to 0.5% rise in the headline figure versus a previous reading of -4.7% and this leaves plenty of room for disappointment. This data will be a source of volatility for the AUD today.

To the downside, we are eyeing this month’s low at 0.8850 for AUD/USD as near term support. To the upside, resistance is in the 0.90 region ahead of 0.925. GBP/USD experienced some volatility as BoE Gov Mark Carney hit the wires. The pair initially dropped to 1.543 then spiked back above 1.55 and is currently sidelined at around 1.553. Gov Carney was not as dovish as the market expected and this gave the sterling a kicker. EUR/USD also slid but is surprisingly still holding above 1.33 and will be back in focus later today with German CPI, unemployment and European retail PMI all set to be released later today. German Buba President Weidmann will also be on the wires.

On the US front we have unemployment claims and GDP data due out. Fed member James Bullard will be on the wires later and could cause some movement on the USD front.

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