AUD Pressured As Funds Forced To Liquidate Positions

Heading into today’s European trading session, the risk tone is indecisive. Asia-Pacific indices are mixed, measures of volatility are subdued and safe-havens mixed.

Leading Asia-Pacific indices to the downside is the Hang Seng at -3.52%, followed by the CSI 300 at -2.21% and the ASX 200 at -2.16%. The Nikkei 225 and Topix are both positive on the session at -0.58% and -0.81%, respectively.

In the FX complex it’s AUD and JPY leading to the downside, highlighting the current mixed risk sentiment. Regarding the former, reports suggest weakness is likely to result from the forced liquidation of distressed funds following yesterday’s poor performance of US indices.

In contrast and leading to the upside is USD, with the reserve currency having pared its post FOMC weakness and advanced to fresh weekly highs against many of its counterparts. Strength in the currency appears to be a result of multiple factors, including demand from yesterday’s poor US indices performance and expectations for today’s US jobs report to further support aggressive US monetary policy.

Looking ahead, today’s European session is light on tier one data, with the highlights and final high-impact events being US and Canadian employment data in the following US trading session.