Back to Risk Off as Yen Gains

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Market Drivers February 7, 2018
USDJPY unwinds yesterday’s gains back to 109.00
New Zealand employment improves
Nikkei -4.73% Dax -1.82%
Oil $63/bbl
Gold $1340/oz.
Bitcoin $6050

Europe and Asia:
NZD Employmenent 4.5% vs. 4.7%
GBP UK Hailfax -0.6% vs. 0.2%

North America:
No Data

Risk off dominated trade in FX today in Asian and early European session, although there was no pressure from other markets and the moves seemed to be strictly FX related as all the yen pairs sold off hard dragging EURUSD and GBPUSD with them.

There was no economic news today, but on the political front, the Germans appear to have reached a coalition deal which will provide a measure of stability for Europe’s largest economy but had virtually no impact on trade today as EURUSD shrugged off the news. The pair was pressured all night long by EURJPY sales and fell to a low of 1.2355 from 1.2400 session highs.

After several days of massive volatility, FX pairs has settled into a quiet range today, but calm may be quickly shattered if US equities once again begin to weaken. For now the dollar continues to attract safe haven flows except against the yen and could pick up momentum into North American trade if 1.3900 in GBPUSD and 1.2350 in EURUSD is breached.

The North American calendar is barren, but later in the session today the market will hear from RBNZ. The consensus is for no change in policy from New Zealand, but traders will be looking for any clues as to when the central bank may begin to resume tightening monetary policy. The New Zealand economy has been surprisingly robust with growth projections rising to 3.8%V this year. The latest dairy auction yesterday saw an increase of 5.9% and yesterday’s strong labor data suggest that growth is not only sustainable but accelerating. Given that dynamic the RBNZ may hint that it is willing to consider tightening this year rather than next, as most market analysts predict.

If the statement proves to be hawkish kiwi could be the biggest mover in North American trade today targeting .7400 once again

Boris Schlossberg
Managing Director

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