Janet buoys risk as traders await EU unemployment data

The FX markets embraced the risk positive environment that was initiated in Chicago yesterday afternoon by Fed Chairwoman, Janet Yellen. She reiterated that there is still substantial slack in the US economy and whilst inflation remains benign, the Fed has the ability to keep interest rates low. The EU inflation reading of 0.5% has been dismissed as reports from ECB sources suggest that 70% of these negative pressures come from energy and food prices.

The Asia session saw the official Chinese PMI released at 50.3 from the 50.2 expected, as the Japanese Tankan sentiment dropped to 17 from 19 with the outlook component falling 5 points to 8. Commentators noted that this sentiment reading is the largest drop since the 1997 tax hike, which doesn’t bode well for the 3% consumption tax increase that starts in Japan today.

The RBA kept rates at 2.5% as expected, with a very minimal change to the statement on the exchange rate. “The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously thought as a result of the rise over the past few months. The exchange rate remains high by historical standards.” –the highlighted text was added this month.

Today will be all about PMI manufacturing data from the UK, (the service sector is more important in the UK) EU and the US. The latest EU unemployment rate will be released at 10am this morning.

EUR/USD

Supports 1.3760-1.3715-1.3700 | Resistance 1.3810-1.3830-1.3880

USD/JPY

Supports 103.00-102.70-102.40 | Resistance 103.75-104.00-104.20

GBP/USD

Supports 1.6640-1.6570-1.6545 | Resistance 1.6700-1.6720-1.6750