Will FX Market Awake From Its Slumber Today? Let's Hope So

 | Aug 29, 2014 05:58AM ET

We managed all of 21 pips of trading range overnight in USDJPY as Japan released its latest raft of inflation and other data in yet another session of lacklustre action in currencies. The AUDUSD range was 14 pips. Let’s hope these last few days before the US three-day weekend (Monday is Labor Day) that marks the end of summer are also the end of the most excruciatingly boring summer doldrums I have witnessed in my career of trading the markets.

Japan’s jobless rate ticked higher again unexpectedly, to 3.8% vs. the 3.7% expected. This is still a relatively low official jobless rate, but keep in mind that the rate in the 60s and 70s was closer to 1%, and was 2.0-2.5% even during the early 90’s. Also keep in mind that this is less impressive given Japan’s rapidly shrinking workforce, which will fall something like 40% by 2050 from its current levels. The household spending data also came in weak, as did preliminary industrial production figures for July. Not much to recommend the JPY, in other words, though the market hardly reacted as USDJPY moves far more on US data than on Japan’s data releases.

European Central Bank policymaker Ewald Nowotny said that the ECB may forecast slower growth at next week’s ECB meeting, noting that Germany is “no longer able to be a locomotive for growth”.

Yesterday’s Ukraine developments (with President Petro Poroshenko cancelling a trip to Turkey as Russian troops had “invaded”, with that statement later partially retracted), and the general signs of the conflict escalating, have the ruble on the defensive, with USDRUB pushing toward the highs of the cycle around 37.00 this morning. European bourses and even the euro will remain a bit sensitive if the situation escalates further. NZD weakened a bit further overnight on sharply weaker ANZ survey readings for August, but the move was not holding into this morning, suggesting some risk of the selling pressure on the currency easing up for the moment. Still, the data does further damage to the kiwi story and further weakness may lie in the weeks to come. EURNOK should see a bit more volatility today on Norway’s data releases (unemployment rate and retail sales) this morning, as well as the latest Euro Zone inflation and unemployment rate data a bit later. A combination of in-line to stronger Norwegian data and a weak inflation reading from the EU today could see the pair pushing toward the ultimate supports just below 8.10, but volatility potential in the short term may be greater to the upside, given market positioning.