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Thin Pre-Weekend Interest For Yen

Japanese data was less than exemplary on the day as reports reflected more of a setback in the economy rather than an advance. As a result, the downside data lent to further overall weakness, as the underlying currency remained rangebound on the day with traders remaining wary of initiating further positions pre-weekend.

For the month of January, spending figures plummeted past the consensus rise of 3.5 percent expected. Actual figures dipped 1.5 percent, with the annualized comparison plunging 4.7 percent. Consumer price data didn't fare any better as deflationary suggestions remained. According to the Tokyo survey, prices dipped 0.1 percent overall while remaining unchanged, excluding the volatile food component. Comparatively, national prices rose in line by 0.4 percent while climbing slightly higher against consensus core figures by 0.3 percent.

With inflationary pressures seemingly tepid, it only dims the anticipation of forthcoming interest rate hikes slightly. With futures prices reflecting a mounting bias and the bond market subject to a sell off this week, interest remains high of a near term hike. Ultimately, as a result, yen strength could return the pair to the 115.60 support seen overnight.

AUDUSD

Poor Australian Performance

Data was additionally disappointing in the Australian economy as service performance data and a wider trade deficit lost to better than expected U.S. figures. According to the AiG Performance of Service Index, sales, new orders, and employment components declined, pushing the overall figure lower for the first time since May.

With softness seen in consumer sectors and larger declines in the wholesale and retail trade sectors, the report continues to suggest a previously mentioned plateau in the economy's growth and a pullback remains imminent. Put into a numerical perspective, the report dipped 4 points to a 48.7 reading compared to a previous 52.7 seen in the month of January. Trade data fared no better as the deficit widen to more than double the consensus figure.

In the month of January, with imports remaining lofty and exports narrowing slightly, the balance ballooned to A$2.6 billion from A$1.15 in December. Now with weakness in the service sector and a wider deficit, there remains little evidence for central bankers to consider any current tightening.

NZDUSD

Dollar Hike Suggestions Continue To Mount

Dollar data was light, but enough to push bidders towards the greenback side and away from the Kiwi. Gathered as mixed, dollar data was still positive as the figures reinforced speculation that central bankers will be lifting rates another 25 basis points when they next convene.

Rising to a 60.1 reading, growth in the U.S. services industry bucked the consensus figure at 58 and rose above the previous expansionary figure of 56.8 seen in January. Bolstered by higher amounts of corporate and consumer spending, the index of new orders rose slightly as the employment component jumped to the highest since August.

Coupled with the recent uptick in overall manufacturing activity and solid retail suggestions, market sentiment continues to be heightened of another rate hike as Fed officials remain attentive to current economic data in gauging subsequent decisions. The ultimate question still remains however, as to when tightening bias will end and the deficit focus will begin.