Japanese Yen
The relatively tranquil waters of the Korean Peninsula turned stormy early this morning when the North Korean ambassador told the UK press of plans to go ahead with its sixth nuclear test. The boom that was heard across currency markets early this morning was the USDJPY toppling from 114.30 to sub 113.80, as dollar-yen dealers were whipped into a frenzy, reducing topside USDJPY exposure on the geopolitical headline.
Look for North Korea headlines to sway short term USDJPY sentiment, but ultimately, the recovery of risk appetite should send the JPY lower, and with even greater velocity, if US yields continue to climb.
Australian Dollar
Commodity currencies were already warranting a high degree of attention as the markets weighed in on China’s growth, amidst a tightening of financial provisions. Despite commodity concerns, the Aussie dollar was a key event overnight, trading to a low at .7335 dispirited by weak retail sales data, which could certainly pressure the RBA into action. RBA speculation is rife this morning with rate cut chatter filling the airwaves as retail consumption is a key metric for the RBA policy view
While there was a little cheer from the AUD post-federal budget, I think dealers will look past the event and focus on a drop in domestic consumption data and the plight of commodities. With iron ore prices looking for a base, I would expect pressure on the AUDUSD to continue.
China’s April CPI and PPI reports will be the primary focus for local traders today.
Euro
Before the North Korean sabre rattling, US dollar yields were climbing, leading to notable moves in G10 as the greenback roared back to life. While the dollar move has been broad based, but with the EURUSD making an all too significant close below 1.0950 early this week, recently minted pre-election euro longs headed for the exits. While the French election outcome should be good for both risk and the Euro, the EURUSD bulls appear to be exercising a high degree of caution before they ultimately leg back into positions likely targeting retrace of the post round one election move (1.0840-20) support levels.
