Dollar Holds Ground Against Yen

Daily Analysis - 27/06/2017

Investors Eye Upcoming Yellen Speech

The US dollar is holding firm on Tuesday, with the greenback reaching a one month high against the Japanese Yen overnight. Federal Reserve Chairwoman Janet Yellen is set to speak later in the day, with investors eagerly waiting to see if she still stands behind her more upbeat economic outlook.

Yen’s Safe-Haven Appeal Dips

Federal Reserve Chairwoman Janet Yellen is set to take part in a discussion on the state of the global economy at the Royal Academy in London. Investors expect Yellen to reiterate her positive views on the US economy despite a recent batch of lacklustre data, which should lend further support to the Fed's projection of lifting interest rates once more before the year ends.

Also in focus is the fourth annual ECB Forum on Central Banking, currently taking place at the Portuguese hilltop resort of Sintra, with Mario Draghi scheduled to deliver the introductory speech at 09:00 GMT. USDJPY was last seen around 111.700, reversing from a one month high of 112.075 reached overnight with the break above the most recent high potentially unlocking further upside in the pair.

French Jobless Total Edges Higher

The latest figures presented by the Labour Ministry showed that the number of job seekers in France inched upwards in May despite ongoing efforts to combat unemployment. Registered job seekers in mainland France increased by 22,300 last month, pegging the total figure at 3,494,100. While that translated to a 0.90% gain over the past three months, year-over-year, the annualized figure recorded a drop of -0.80%. The gradual improvement in the French economy has so far resulted in only a slow decrease in the number of job seekers.

Centrist President Emmanuel Macron inherited a high unemployment rate when he assumed office in May. He aims to lower the rate to 7.00% by 2022 from the current 9.70% by easing and reforming existing labour regulations. In the meantime, CAC 40 futures have reversed from strong resistance at 5320 reached on Monday to trend around the 5280-mark ahead of the European open.

New Zealand Trade Surplus Narrows

Data released overnight by Statistics New Zealand revealed a narrowing in the nation’s trade surplus in May compared to the same period a year ago. The country's merchandise trade surplus stood at NZD$ 103 million last month versus NZD$ 343 million reported a year earlier. The consensus forecast of economists had projected a surplus of NZD$ 420 million for the month.

However, despite the monthly contraction, the balance of trade remains positive after exports climbed to their highest point in more than three years. Exports rose by 8.70% to NZD$ 4.95 billion in May on the back of climbing prices for dairy exports to China. The gains were outpaced by the 15.00% surge in the nation’s imports to $4.85 billion for the period, led by a 65.00% increase in crude oil purchases. NZDUSD is up in Tuesday morning trade following the results, with the pair retaking the 0.7300 level.

Mexico Economy Rebounds

Economic activity in Mexico picked up in April compared to a month earlier as an expansion in the services sector offset a drop in industrial output. The economy grew 0.10% on a monthly basis through the end of April according to a report from the National Statistics Agency published on Monday. This data marked a significant rebound after two straight negative monthly readings. Services grew by 0.50% for the period while industrial and agricultural outputs declined by 0.30% and 0.90% respectively.

Mexico's economy is forecast to grow at around 2.00% this year after recent data revealed no major impact from the uncertainty surrounding US trade policy under President Donald Trump. A separate report from the federal statistics office showed the seasonally adjusted jobless rate easing to 3.50%. The positive data has helped the Peso appreciate, with USDMXN sliding after breaking below key support at 17.8880.