Yen 2 Yuan

The Japanese Yen outperformed overnight as carry trades followed stocks lower after a round of disappointing economic data. Equity index futures are sharply lower, hinting more of the same is ahead in European hours.

 The rally continues with the market accelerating beyond latest barriers by 1.3100 thus far.

Another session of broad based USD weakness on Thursday, with the buck getting hit hard on some dovish comments from Fed Bullard who expressed concerns of Japan-like deflation and the potential for quantitative easing.

A very interesting week with regard to commodities saw crude oil inventories surge to levels just shy of 10-year highs and gold ETF holdings plummet 500,000 troy ounces. Nevertheless, the near-term outlook for both commodities is highly uncertain.

The US Dollar has broken key technical support, opening the door for a further 2 percent decline. Meanwhile, stocks continue to stall, signaling a potential double top and hinting that the link between risk and the greenback may be fading.

• Dollar Struggles Ahead of 2Q GDP – Fed Maintains Dovish Outlook
• Euro Rallies as Economic Confidence Tops forecast, German Unemployment Declines
• British Pound Continues to Trend Higher Ahead of GfK Consumer Confidence Survey
• Australian Dollar Regains Footing as Swan Talks Down Recent Inflation Report
• Japanese Yen Rallies Extends Yesterday’s Advance On the Back of Risk Aversion
• New Zealand Dollar Pushes Lower Following Dovish Comments Subsequent to RBNZ Rate Hike

Student's Question:

The Pound was boosted in early trading as the consumer credit report posted an unexpected 0.2B gain versus forecasts of a 0.1B decline. However, a sharp reversal in equity markets quickly erased the GBP/USD’s advance as the pair continues to be driven by risk sentiment with the relationship strengthening to 46% from 42% a week ago.

Another solid week of U.K. fundamental releases, including the CBI sales report which reported that 51% of retailers surveyed said that sales were better than a year ago versus 18% that had negative results, added to prevailing bullish sentiment. Domestic demand may continue to improve as the consumer credit report surprised with a 0.2 billion pound increase versus expectations for a 0.1 billion pound decline.

EURUSD – Euro Forecast to Gain Versus U.S. Dollar
GBPUSD – British Pound Turnaround May Be on the Horizon
USDJPY – Japanese Yen Positioning Remains
USDCHF – Swiss Franc May Continue to Strengthen against Dollar
USDCAD – Canadian Dollar Forecast to Break Below Narrow Range
GBPJPY – British Pound Forecast to Advance Against Yen
 
View individual currency SSI charts in our FX Sentiment section
 

As the world’s largest economy is expected to expand at a slower pace in the second-quarter of 2010, the advanced GDP report could spur further weakness in the U.S. dollar and lead the central bank to hold a loose policy stance throughout the second-half of the year as the outlook for future growth falters.