Market News: Risk Demand Rises, Euro Inflation In Focus

Adrian Jones

Adrian Jones

As demand for the safe-haven currencies dropped on hopes of China stimulus measures, the Yen felt the brunt and struggled against the Dollar while dropping to a 6 year low to the New Zealand Dollar.

Earlier the Dollar remained steady at 102.84 Yen while the Kiwi climbed up to 89.26 Yen, a level last hit in November 2007.

Traders are focused on Tuesday’s release of China’s manufacturing PMI survey especially after recent disappointing data signalled a slowdown in China’s economy.

I expect that China’s central bank will be under pressure to easy monetary policy as the data is likely to show a decline in manufacturing production figures, pointing to further decline in growth momentum.

Another focal point for traders will be Euro zone inflation data which is due out later today.

Last week data had shown that a key measure of German inflation had unexpectedly slowed in March, which pointed to a risk of further inflationary decline in the region, closer to what European Central Bank (ECB) President Mario Draghi has called the “danger zone” below 1% for a sixth month.

On Saturday Bundesbank President Jens Weidmann though, said that the ECB should not over-react to the slowdown in inflation. He claimed that the slowdown was mainly the result of temporary cyclical factors.

Click on Image to Enlarge

[Image: Bundesbank President and ECB council member Jens Weidmann]

Nevertheless, a weak number is sure to place the ECB under increased pressure to act and I expect that to be negative for the Euro in the medium term.

Earlier the Euro remained steady at $1.3749 and dropped slightly by 0.1% to close to 141.33 Yen.

Later today, the market will also focus on comments by U.S. Federal Reserve Chair Janet Yellen for any new signs on the Fed’s monetary policy outlook.

Commodity currencies, like the Australian Dollar, had earlier taken a breather against the Dollar following their recent rally on expectations of more stimulus from China.

The Aussie dropped 0.3% to $0.9221 while the Kiwi held steady at $0.8649.

All the best!

Adrian Jones

What Next?

Recent Articles

Leave a Reply


Submit Comment