The Japanese yen was stronger across the board thanks to Prime Minister Abe’s confirmation that the sales tax hike will be pushed back from the initial April 2017 schedule to October 2019. Because of that, consumer spending and price levels could stay supported for much longer, especially since the Japanese economy has just recovered from the earlier tax hike in 2014.
USDJPY fell from the 110.00 levels to a low of 109.05, EURJPY is down to the 122.00 major psychological level, GBPJPY dropped from 161.00 all the way down to 157.50, and CADJPY retreated to the 86.50 support area.
Greenback failed to benefit from stronger PMI, ADP next
Economic data from the US came in mostly stronger than expected but the Greenback ended up weakening against most of its forex counterparts. The ISM manufacturing PMI rose from 50.8 to 51.3 instead of falling to the projected 50.5 figure, with the prices index accounting for most of the gains. Construction spending slumped 1.8% instead of posting the projected 0.5% gain, leading some to price in weaker odds of a June Fed rate hike.
For today, the ADP payrolls report is up for release and a 174K increase in hiring is eyed. This would be stronger than the previous 156K gain, indicating positive momentum in the employment sector and setting the stage for a potential upside surprise in the US NFP due on Friday.
AUD and NZD advance on strong data
The New Zealand dollar got a boost from the latest Global Dairy Trade auction, which yielded a 3.8% gain in dairy prices. NZDUSD rose further past the .6800 handle to a high of .6826 so far, NZDJPY is up to 74.50, NZDCAD rallied to a high of 89.23, and EURNZD is down to 1.6335.
In Australia, retail sales rose 0.2% in April, slower than the projected 0.3% increase and the previous 0.4% rise. The trade balance showed a smaller deficit of 1.58 billion AUD from the earlier 1.97 billion AUD as exports rose 1% in April, continuing the positive momentum from the first quarter.
Up ahead, the ECB interest rate decision could pose a huge event risk for the day, as investors are looking to Governor Draghi to release updated forecasts on growth and inflation. Another market catalyst lined up is the OPEC meeting which might yield a decision to curb output levels and keep oil price gains going.
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