This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
Currency market update on March 9
In times of turbulence, the best thing that you can do – stay oriented. Hence, let’s have a look at currency pairs and see “who does what” so you can have a tactical perspective. Specifically, we will identify the lowest spots and the high ground of the current disposition in Forex - both are best seen through the prism of the JPY.
USD and EUR: giving ground to the true safe-haven in Japan
Unlike a while ago, the JPY, even despite internal economic challenges in Japan and external damage from the coronavirus, now enjoys the status of the primary safe-haven currency. Both the USD and the EUR lost value significantly against the Japanese yen, which now trades at 102.25 against the US dollar and at 116.90 against the euro. Both currency pairs are at tactical lows, with the USD/JPY testing the supports of 2016. Given the fact that the virus is now more active in other countries rather than China itself, there is a solid reason to expect JPY to grow further against the other currencies.
AUD and NZD: the weak link
Among other currencies, the AUD and NZD suffer the worst damage. Especially, against the JPY. The AUD/JPY dropped to the lows of 20008, while the NZDJPY is testing the support of late 2012. That is due to the fact that both Australia and New Zealand have a large part of their exports tied to China, which in turn takes a big chunk of their GDP. Hence, the subdued consumption in China takes a direct shot at these economies reducing the value of their respective currencies. And JPY, as it is currently superior to the USD as a reserve currency, gives the strongest contrast to the depreciation of the AUD and NZD. Hence, both currency pairs are expected to stay at rock-bottom levels and probably go further below.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.
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The RBA and the Bank of Canada will add volatility to the AUD and the CAD, while USD is expected to be boosted by the Non-farm payrolls.