U.S. Dollar Steadies Against Yen

Daily Analysis - 21/08/2017

Greenback Rebounds from 4-Month Low

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The U.S. dollar reversed from a four-month low against the Japanese yen as investor attention shifted to the annual Federal Reserve central bankers’ conference in Wyoming. The greenback tumbled to as low as 108.605 yen on Friday amidst increasing political uncertainty in Washington.

Investor Risk Appetite Improves


The flight of capital to the safe-haven yen subsided following Stephen Bannon’s ousting from the role of a senior White House adviser. The departure of Bannon, known for his economic nationalist views, is likely to diminish tensions within the White House and the Republican Party. Federal Reserve Chairwoman Janet Yellen and the European Central Bank’s Mario Draghi will be among a host of top officials addressing this year’s annual central banking conference at Jackson Hole, Wyoming that kicks off on Thursday.

On the U.S. economic data front, the University of Michigan's Consumer Sentiment Index rallied to its highest in seven months, reflecting greater confidence in the economic outlook. USDJPY is marginally lower in Monday morning trade. The pair was last seen around 109.200.

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Euro Area Current Account Surplus Narrows


The euro zone's current account surplus contracted in June, data from the European Central Bank showed Friday. The seasonally-adjusted surplus in the currency bloc slipped to 21.20 billion euros ($24.90 billion) from 30.50 billion euros in May. The 12-month cumulative current account surplus to June eased to 3.10% of the region's gross domestic product from 3.50% in the year ago period.

The ECB has forecast the surplus to abate to 2.80% of GDP in 2017 from 3.40% last year. The euro area dramatically swung into a current account surplus following the 2012 debt crisis, largely on the back of a record surplus in Germany, which hit 8.60% of GDP in 2016. DAX September futures were last trading around the 12150-mark.

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Canada Inflation Accelerated in July


The annual inflation rate in Canada edged higher in July amid rising gas prices, suggesting consumer price pressures are ticking up following the subdued reading in June. The consumer price index gained 1.20 %in July from a year earlier, according to data from Statistics Canada, compared to a 1.00% advance in the previous month. The July reading matched expectations of economists at the Royal Bank of Canada.

On a monthly basis, the CPI remained unchanged in July. Meanwhile, the more representative annual rate of core inflation increased 1.50% in July, versus a 1.40% rise in the prior month. The Canadian central bank last month lifted its benchmark interest rate by a quarter-percentage point on improving economic outlook, and signalled further hikes could be in the offing. Data from the overnight index swaps market suggests there is a two-in-three likelihood of an interest rate increase in October. USDCAD was last seen just above the strong support at 1.25900.

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New Zealand Tourist Arrivals Rise


The number of holidaymakers arriving in New Zealand climbed 3.80% year-on-year in July to 246,945, versus a 17.30% surge in the prior month. The biggest increase came from Australian arrivals (+6000), followed by China (+3100) and the United Kingdom (+2100). On a monthly basis, the number of visitors fell by a seasonally adjusted 5.30% last month, compared to a downwardly revised 4.90% in June.

During the year to July 2017, a record breaking 1.90 million tourists arrived in New Zealand, which is almost double the figure in the year to July 2002, when the number of holidaymakers first hit the 1 million-mark. Tourism is a key component of New Zealand’s economy, directly contributing almost 4.00% to the GDP, and supporting over 10% of the country’s workforce. NZDUSD is up early Monday to currently hover around 0.73200.

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