• Australian dollar trades lower in the morning even as wage growth came in above forecasts
  • Japanese vice finance minister deals a blow to the yen, it’s the weakest currency in G10
  • Dow Jones (US30 on xStation5) fell on Tuesday ending its six-day long winning streak, Walmart tumbled

Taking a quick look at the currency space one may notice that both the Australian dollar and the Japanese yen are among the worst performers in early trading. While there were some reasons to be a little more bearish on the yen, weakness seen in the AUD might be somewhat tricky, at least on the face of it. During the Asian session we got the wage price index (WPI) data from Australia which beat forecasts both in yoy and qoq terms. The WPI showed 2.1% yoy and 0.6% qoq (though without rounding it actually was 0.55%) whereas economists surveyed by Bloomberg had forecast 2% and 0% respectively (the prior values were in line with expectations for the fourth quarter).

link do file download linkWage growth accelerated in the fourth quarter of the past year but the details are not so promising. Source: Bloomberg

Seemingly everything is fine as the report illustrates slowly but surely rebuilding wage pressure, which in turn, could translate into inflation numbers going forward. However, the devil as always is in the details and when we delve into the release it turns out that an increase in a year-over-year basis was predominantly driven by the public sector where wages grew 2.4%. At the same time the private sector reported a much less impressive 1.9% meaning that domestic companies were not so keen to lift wages in the last three months of 2017.

On top of that, there was a release on construction work done for the same period of time which, however, proved to be sub-par as it tumbled 19.4% qoq well below the consensus at -10% qoq. Even as it’s the second-tier reading it came along with the wage data and therefore the overall fallout was adverse for the Aussie.

link do file download linkThe AUDUSD continues sliding after drawing a bearish engulfing at a daily time frame. The pair could be heading toward its nearest support at around 0.7750. Source: xStation5

Furthermore, the yen is currently trading 0.4% lower against the greenback which could be a result of remarks delivered by Japanese finance minister overnight. Asakawa said that he perceives the yen’s recent surge as excessive and described the last move as one-sided. It suggests that the Japan’s Ministry of Finance is closely watching currency movements and it could be ready to intervene if necessary. In response to those comments the yen hastened its sell-off fuelled additionally by US dollar strength. Finally, manufacturing PMI for February fell from 54.8 to 54 as output and new orders grew at the slowest pace since October 2017.

link do file download linkThe USDJPY broke through a crucial support last week, hence any one may suspect that any pullback could prove to be short-lived. There is the possibility that the current upward move might be used to enter shorts at the better price as the US dollar seems to be doomed to failure in the longer-term. Source: xStation5

At the end let’s mention the yesterday’s session on Wall Street which saw the Dow Jones (US30) falling as much as 1%, it was quite a big decrease given a relatively calm day in other indices. The major culprit was Walmart, the world’s biggest retailer, which plunged more than 10% on the back of disappointing online sales during the Christmas period. As it’s been depicted at the chart below Walmart’s US e-commerce sales growth continued its deceleration in the last quarter of 2017.

link do file download linkWalmart shares plunged over 10% in response to lower than expected online sales. Source: Bloomberg