Yen Falls on BOJ Nominee Reports, Euro Eyes Italian Election

The Japanese Yen fell amid reports dovish Haruhiko Kuroda will be nominated to take over the BOJ. The Euro looks to Italian election results for direction.

Talking Points

• Yen Falls on Reports Abe to Nominate Kuroda to BOJ Governor Post

• Australian Dollar Sold as HSBC Reveals Disappointing China PMI Data

• Italian General Election Outcome Threatens Euro and Risk Sentiment

The Japanese Yen came under heavy selling pressure overnight, sliding as much 1.1 percent on average against its leading counterparts, amid rumors that Premier Shinzo Abe will nominate Asian Development Bank President Haruhiko Kuroda to take over as the Governor of the Bank of Japan. Kuroda is viewed as a relatively dovish choice, and with him at the helm the central bank will be expected to push forward with aggressive stimulus to realize Abe’s anti-deflation crusade. The Nikkei led Asian shares higher on the news, amplifying pressure on the safety-linked Japanese currency.

The Australian Dollar likewise fell, with sellers driven by a disappointing Chinese economic data. The HSBC Manufacturing PMI gauge registered at 50.4, showing factory-sector activity expanded at the slowest pace in four months. Economists were looking for a print at 52.2 ahead of the release. China is Australia’s largest trading partner and a central source of demand for the crucial mining sector, meaning a slowdown there carries negative implications for the latter country’s economic growth prospects. That beckons RBA rate cut expectations, weighing on Aussie.

Looking ahead, all eyes are on the outcome of Italy’s general election. The latest polls gathered ahead of the ballot put Democratic Party leader Pier Luigi Bersani in the lead, but PdL party head and former Prime Minister Silvio Berlusconi was penciled in at an uncomfortably close second place. Traders are concerned that hard-fought reforms meant to put Italy’s fiscal house in order will be squandered if Mr Berlusconi retakes the reigns or at least wins enough support to inject him into the coalition-building process. Thisrisks plunging the Eurozone’s third-largest economy and the region at large back into the depths of the sovereign debt crisis, with negative implications for the Euro and risk appetite at large.

Asia Session:

GMT	CCY	EVENT	ACT	EXP	PREV
23:50	JPY	Corporate Service Price (YoY)	-0.2%	-0.2%	-0.4%
1:45	CNY	HSBC Flash Manufacturing PMI	50.4	52.2	52.3

Euro Session:

GMT	CCY	EVENT	EXP	PREV	IMPACT
9:30	GBP	BBA Loans for House Purchase	34000	33636	Medium
10:00	EUR	Italy to Sell 2014 Bonds, 2021-26 I/L Bonds	-	-	Medium
14:00	EUR	Polls Close in Italian General Election	-	-	High

Critical Levels:

CCY	SUPPORT	RESISTANCE
EURUSD	1.3144	1.3244
GBPUSD	1.5056	1.5268

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

New to FX? Watch this Video. For live market updates, visit the Real Time News Feed

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.