Japanese Yen, US Dollar Gain As Markets Digest NFPs, Chinese CPIDaily FXupdated Apr 09, 2012TweetAt GET.com we maintain complete editorial integrity on our content & provide transparent & unbiased information. Companies don't pay us to include their products although we receive a compensation when you successfully apply to products from our partners. See how we make money here.At GET.com we maintain complete editorial integrity.Fundamental Headlines - Job Growth below Estimates Shapes Election-Year Sparring – Bloomberg - Jobs Pose Challenge S&P 500 has Overcome Nine Times – Bloomberg - Iran Rules Out Conditions to Talk – Reuters - China Inflation Exceeds Forecast – WSJ - Path for Romney Getting Clearer – WSJ European Session Summary Risk-aversion was mildly evident in the Asian and European sessions providing follow-through from Friday’s price action after the disappointing U.S. jobs report. The lack of volatility in the overnight is not surprising, however, considering that most major European markets remain closed for the holiday weekend. As such, full liquidity isn’t expected to return to the market until tomorrow, and thus we expect to see somewhat of the first ‘true’ European reaction to the U.S. jobs print on Tuesday. Even though Europe was closed, there was still important data out to start the week that definitely shapes risk trends going forward. The Chinese consumer price index reading for March disappointed to the upside, raising concerns over the evolving economic conundrum in Chinese: how can the People’s Bank of China stoke growth without fueling price pressures? While the Chinese economy remains far from stagflation, policymakers are handicapped for the time being and are less likely to ease going forward. Why does Chinese policy matter? In terms of the FX markets, the Chinese growth pictures not only lends to broader risk-sentiment trends but to the macro-fundamentals influencing the Australian economy as well. China is Australia’s largest trading partner accounting for just over 13 percent of trade, by most metrics. This underscores the reality that Chinese demand for metals – Australia’s largest output sector – provides substantial support for the Australian economy. The Australian economy is already facing significant downside pressures, and a decline in demand for the country’s base metals would be devastating. If price pressures are rising in China as growth slows (this is seemingly occurring), PBoC officials won’t be able to loosen monetary policy; this in turn could hurt Chinese demand for foreign goods. Between the disappointing US nonfarm payrolls report and the Chinese CPI reading, one thing is clear: global policymakers are seemingly handicapped at present and the case to loosen monetary policy further is a weak one. If both the Fed and the PBoC remain on the sidelines, not only is it likely that the U.S. Dollar will appreciate but the Australian Dollar will depreciate as well; and this suggests, given historical correlations, that risk-correlated assets, such as the S&P 500, could be headed for a rough few weeks. EURJPY 5-min Chart: April 9, 2012 Charts Created using Marketscope – Prepared by Christopher Vecchio Overall, the Japanese Yen was the best performing major currency, gaining 0.38 percent against the U.S. Dollar. The European and the commodity currencies were struggling overall, with the Euro leading losses, depreciating by 0.21 percent. With European markets closed, the majors were tethered to tight ranges against the U.S. Dollar; but for the Yen, all of the other majors traded within ¼ of a percent against the Greenback. 24-Hour Price Action Key Levels: 13:50 GMT Thus far, on Monday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading slightly lower, at 9998.93 at the time this report was written, after opening at 10001.20. The index has traded mostly higher, with the high at 10022.80 and the low at 9991.00. --- Written by Christopher Vecchio, Currency Analyst To contact Christopher Vecchio, e-mail firstname.lastname@example.org Follow him on Twitter at @CVecchioFX To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to email@example.comEditorial Disclosure: Any personal views and opinions expressed by the author in this article are the author's own and do not necessarily reflect the viewpoint of GET.com. The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the companies mentioned, and have not been reviewed, approved or otherwise endorsed by any of these entities.