FX market outlook

FX market outlook

Yen strengthens on safe haven demand.

Risk aversion due to geopolitical concerns weighed on markets during Monday’s Asian session. The yen was stronger as investors moved into safe havens following news of a North Korean missile launch.

The dollar slipped against the yen in Asian session trading to reach a low of 113.65, moving further off last week’s high of 114.74 when then greenback was boosted on growing expectations of an interest rate hike by the Federal Reserve this month. The dollar index was down 0.1 percent to open today at 101.48. Meanwhile, lower US Treasury yields also decreased the greenback’s appeal.

The main driver of the dollar will be the US nonfarm payrolls data due later this week. In her speech last Friday, Fed Chair Janet Yellen hinted that a rate hike could come soo,n as long as the economic data holds up. Markets have increased their expectation for a move by the US central bank at the March 14-15 FOMC meeting.

Investors paid little attention to retail sales data out of Australia today. Retail spending rose by 0.4% month-on-month in January, as expected, to post the highest growth since October 2016, after it printed a 0.1% decline in December. The Australian dollar was little changed after the data and was down since the open after being weighed by disappointing inflation data released before the retail sales numbers. Aussie / dollar traded between 0.7569 and 0.7594 during the Asian session.

The euro trimmed some gains made last week against the dollar but was mostly steady above the key 1.06 level. French election concerns continue to weighed on the single currency. News that  independent candidate  Emmanuel Macron is gaining ground in the polls over far right Marine Le Pen, has helped buoy the euro.

During most of the Asian session, sterling consolidated Friday’s gains versus the dollar around 1.2280 before beginning to slip by the end of the session.

In commodities, gold edged slightly lower to $1231.16, while WTI oil slipped back below the $53 a barrel level.

Looking ahead to the rest of the day, the Euro Zone Sentix investor confidence index for March will be released, which is forecasted to decrease from 17.4 to 16.00. Out of the US, factory orders numbers are due for the month of January. Focus will be also on Minneapolis Fed President Neel Kashkari who speaks later in the day.