Japan Q2 GDP Grow Faster Than Expected as UK GDP Meets Expectations

Earlier today, the Japanese statistics office released the preliminary numbers for the second quarter GDP. The numbers showed that the economy rose by an annualized rate of 1.9% in the second quarter. This was higher than the expected 1.4% annualized rate and the Q1 contraction of 0.9%. The growth in the GDP in the quarter was mostly because of increased capital expenditure which rose by 1.3%. This was higher than the expected growth of 0.6%. Another reason for the growth was the increase in private consumption, which rose by 0.7% in the quarter, higher than the expected 0.2%.

The growth was hampered by external demand which contracted by minus 0.1%. Traders were expecting it to remain unchanged at 0.1%. This was a reflection of the challenging trade environment. During the quarter, there was a disruption in trade as the US initiated tariffs on steel and aluminium. In addition to the GDP numbers, the country released the PPI numbers which beat analysts’ forecasts. The PPI in July rose by 3.1%, which was higher than the expected 2.9%.

The expansion in the Japanese economy was released a week after the United States released its GDP numbers for the second quarter. The numbers for the United States rose by 4.1%, which was the fastest increase since 2014 and was a reflection of the positive impacts of the tax reform and the spending package released earlier this year. Traders are now waiting for more data to predict whether the economy will continue moving higher in the third quarter.

The Office of National Statistics (ONS) released the first preliminary numbers for the UK GDP. The numbers showed that the economy rose slightly in the second quarter. On an annualized basis, the economy rose by 1.3%, which was expected. In the first quarter, the economy had expanded by 1.3%. On a quarterly basis, the economy rose by 0.4%.

On another positive note, the manufacturing production in June rose by 0.4%, which was higher than the expected 0.3%. It was nonetheless lower than the 0.6% gain in May. On an annual basis, the manufacturing production rose by 1.5%, which was higher than the expected 1.5%. The industrial production too of 1.1% growth was better than the expected 0.7% gain. The trade balance in June of 11.38 billion pounds was better than the expected 12.05 billion pounds and the balance in May of 12.52 billion pounds.

After the data was released, the pound remained lower than the dollar as traders continued to worry about the possibility of a no-Brexit deal. Such a deal will be a game changer for the UK economy whose biggest trading partner is the European Union.

Later today, we will get the CPI data from the United States. Traders expect the CPI to have risen by an annual rate of 3.0% while the core CPI is expected to rise by 1.3%. Still, the EUR/USD pair is lower as traders get concerned about Europe’s exposure to the Turkish Lira.

The post Japan Q2 GDP Grow Faster Than Expected as UK GDP Meets Expectations appeared first on Forex.Info.

USD/JPY consolidates gains made on tariff war hopes

Are seats at the negotiating table being dusted off?

News breaking late yesterday that the US and China have plans once again to sit at the negotiating table and hopefully diffuse an escalating trade war helped risk sentiment. The announcement comes ahead of the next scheduled introduction of tariffs on $16b of Chinese imports, possibly this week. However, initial comments from US officials caution that a definite timetable, topics for discussion and the format of the talks have not been finalized. Taking some of the shine off this positive news were headlines suggesting the Trump administration is considering increasing the tariff rate on the next $200b worth of Chinese goods from 10% to 25%.

Trade war breakthrough?

The initial reaction in NY currency markets was for the JPY to weaken amid a greater appetite for risk, with USD/JPY hitting an eleven-day high of 111.95. Wall Street was already on a roll as Facebook results beat estimate and the trade news helped the industrial sector. The Asian session struggled to maintain this momentum and USD/JPY traded in a tight range, managing to eke out gains of just 0.01%. Equity markets across the region traded in the red.

USD/JPY Daily Chart

Source: Oanda fxTrade

Mixed signals from PMI readings so far

The start of the month sees the release of a slew of PMI readings from across the globe. Contrasting with the slightly weaker numbers out of China released yesterday, Japan’s PMI jumped to 52.3 in July from 51.6 at the provisional reading. China’s Caixin PMI reading, which focuses more on small to medium enterprises, echoed the sentiment of the official release with a slide to 50.8, equaling the low in November last year. More worrying was the new export orders component which contracted at the fastest pace in two years, no doubt weighed down by trade war concerns.

Still to come we have Italy, France, Germany and the combined Eurozone along with the UK and followed by the US later in the day.

See the MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

Two central bank meetings in the headlights

While there are no expectations for any adjustments to Fed policy at today’s FOMC meeting, markets will be cautious of any shift in the tone of June’s statement which focused on accelerating economic growth, strong business investment and rising inflation. While there is no press conference scheduled, it would be remiss to simply just ignore this event.

More action is likely from the Reserve Bank of India which is widely expected to increase its benchmark repurchase rate by 25 bps to 6.5%, a two-year high. Rising core inflation on the back of higher oil prices and a week local currency would be the justification for the hike following on from June’s surprise move. The rupee has fallen as much at 8.8% versus the US dollar this year and is among Asia’s worst performing currencies.

USD/INR Monthly Chart

Source: Oanda fxTrade

Source: MarketPulse

Dollar marks time in Asia as traders consider a busy data week

Traders scale back activity ahead of data/event rush

A busy data week culminating in the monthly US jobs report and approaching month-end all conspired to keep traders in Asia sidelined and currencies range-bound at the start of the week. Traders were also mulling the aftermath of US GDP data release on Friday which showed the US economy growing 4.1% on an annualized basis in Q2. The US dollar struggled to get any kind of lift from the strong data as analysts and commentators immediately looked towards Q3 numbers, which are expected to be nowhere near as buoyant. That didn’t stop US Treasury Secretary Mnuchin from saying that he believed the US economy could sustain growth of at least 3% for the next 4-5 years.

Dollar Mixed Ahead of Busy Week in the Market

Japan retail spending ticks up as BOJ meets

The only data releases in Asia were second-tier. Retail trade in Japan rose 1.8% y/y, above economists’ forecasts of a 1.6% gain while large retailers’ sales posted positive growth for the first time in three months. USD/JPY was mostly steady, rising 0.09% while EUR/JPY gained 0.04%. AUD/USD was mostly sidelined, holding close to the 0.74 handle with a slide of 0.13% to 0.7391.

Gold continues to hover near one-year lows as latest data from Chicago shows speculative investors reduced their net long gold positions in the week to July 24. Oil prices extended Friday’s slide, easing down to $69.50

See the MarketPulse data calendar here: https://www.marketpulse.com/economic-events/

Markets on Central Bank watch

The Bank of Japan starts its two-day meeting today, the first of many to follow during the week. There is mounting speculation that the BOJ will discuss an adjustment to its JGB target rates and possibly scaling back its investments in ETFs that track the Nikkei. When it comes to old-fashioned monetary policy, analysts are unanimous in their view that there will be no change in rates, with the possibility of allowing the 10-year JGB yield to move above zero percent, which is its current target level. The 10-year yield is trading at 0.11% today and notably has held above 0% since September last year.

The Bank of England is seen hiking rates by 25 bps to 0.75% even though inflation appears to be on a downward tack and data fails to be convincing while the FOMC is not expected to result in any rate changes, more a confirmation that a September hike is still very much on the cards. The Reserve Bank of India is also expected to increase its benchmark rate while Brazil’s central bank is seen standing pat.

Japan 10-Year JGB Yield Chart

Source: Bloomberg (https://www.bloomberg.com/quote/GJGB10:IND)

Yen buoyed as inflation tops estimates

Tokyo prices rise most in four months

This morning’s release of consumer prices in Tokyo saw the biggest rise in four months. Prices rose 0.9% y/y, beating economists’ estimates of a mere 0.5% increase by a large margin. Prices in June were 0.6% higher than a year earlier. This contrasts with the national reading for June which showed a below-forecast 0.7% gain. Excluding food and energy, the price rise was a more modest 0.5% y/y.

NOTE: Japan releases two sets of inflation data. A national one, which has a lag of one month, and one for just Tokyo, which is more current.

In the currency markets, the yen was given a little boost across the board post-data though there was perhaps more reaction in the bond markets. The 10-year JGB yield touched 0.1% for the second straight session. Last Monday, the Bank of Japan announced its first special fixed rate bond auction since February, offering to buy 10-year bonds at 0.11%. The Bank announced unchanged tenors and amounts at its last daily bond auction before the rate meeting on Monday/Tuesday next week.

USD/JPY Daily Chart

Source: Oanda fxTrade

Bank of Japan to change QQE plan?

Also fueling the rise in Japan yields is speculation that the Bank will make changes to its bond yield targets at next week’s meeting. Observers suggest that quite often when it comes to the Bank of Japan, there is no smoke without fire. Some suspect that they may be testing the waters for such a move later in the year. Analysts reckon that any shift higher in yields, or a steepening of the yield curve, would be beneficial for Japanese banks and financial institutions.

10-Year JGB Yield Chart

Source: Bloomberg.com

ECB sticks to its plans

At yesterday’s rate meeting, the ECB maintained its stance to end bond purchases by the end of the year and pledged to keep interest rates static at least through the summer of 2019 before considering a tightening bias. The EUR did slide versus the dollar after the press conference, though this could also be attributed to gains in the US dollar ahead of today’s release of US Q2 GDP data.

Dollar Rebounds in Anticipation of Q2 GDP Release

US Q2 GDP data on tap

The main event on today’s data calendar will undoubtedly be the release of US Q2 GDP data. Estimates suggest growth accelerated to 2.3% q/q from +2.2% in Q1, while the annualized figure is seen jumping to 4.0% from 2.0%. Apparently, a top Trump official has been telling Republicans to expect a “blockbuster GDP number” while Trump himself has commented he’d be happy with a number 4 in front. Other data releases include German import prices and US personal consumption expenditure prices for Q2.

You can see the full MarketPulse data calendar at: https://www.marketpulse.com/economic-events/

Live FX Market Analysis – 24 July 2018

In this week’s FX webinar, Senior Market Analyst Craig Erlam discusses the latest events that are moving financial markets – Trump attacks the Fed, Brexit plans widely criticized etc – and previews the week ahead.

Craig also gives his live analysis on EURUSD (9:22), GBPUSD (11:48), EURGBP (18:45), AUDUSD (19:34), USDCAD (21:04), GBPCAD (22:14), NZDUSD (23:31), USDJPY (24:38), GBPJPY (27:41) and EURJPY (29:09).

USD/JPY advances to six month high post-testimony

Economy faces years of strong jobs growth in a low inflation environment

The dollar continued to push higher in Asian trading, building on gains made in the previous session after Fed Chairman Powell’s described the US economy as in a good place during his semi-annual testimony before the Senate Banking Committee. He said he sees the economy on track for years of strong jobs growth in a low inflation environment. However, given the as yet unquantified threat of trade tariffs, he did mention that, while policymakers were on a path of gradual rate hikes, the tightening is not a “fait accompli” and implied it could be flexible should data dictate.

USD/JPY continued its march higher, touching its highest level in six months. Equity markets struggled to echo positive sentiment on Wall Street, with losses of 0.24% for the Nikkei, 0.99% for Chinese stocks and a loss of 0.33% for Singapore. The only bright spot was Australia where the index rose 0.16%. There were no key data releases in Asia, so other currency pairs drifted in line with the dollar’s advance.

Goldilocks economy warrants a Goldilocks Federal Reserve chairperson

Japan bolsters trade links with Euro-zone

Japan and the European Union signed a trade agreement yesterday that lowers barriers on the movement of goods and services between the two economies. The agreement has been a work in progress since 2013 and it may be more than just coincidence that the deal is finalized as the two economies face the problems of US protectionism.

While on the trade topic, the G-20 meeting gets under way in Argentina this weekend and treasury secretary Mnuchin has stated he will not seek a bilateral meeting with China during the get together. Meanwhile the US Treasury Department has reiterated that it labels China’s behavior as economic aggression.

GBP/USD – UK job numbers disappoint, send pound lower

UK dominates the data calendar

The data dump from the UK continues today. Following on from yesterday employment and wages data, today features CPI and PPI numbers for June. Headline inflation is expected to tick up to 2.6% y/y from 2.4%, according to economists’ forecasts while core data is seen edging up to 2.2% y/y from 2.1%The Euro-zone also reveals its inflation data while the US session has housing starts and building permits to contend with. We also have the second session of Fed Chairman Powell’s testimony before Congress and the release of the Fed’s Beige Book to look forward to.

You can see the full MarketPulse data calendar for today here: https://www.marketpulse.com/economic-events/

Oanda Market Beat

Live FX Market Analysis – 10 July 2018 (Video)

In this week’s webinar, Senior Market Analyst Craig Erlam discussed the latest Brexit developments as two members of her team resign after an apparently united and productive meeting on Friday. He also talks Trump, after the latest imposition of trade tariffs and ahead of his trip to the UK and the NATO summit, and previews the week ahead.

Craig also gives his live analysis on EURUSD (12:20), GBPUSD (15:03), EURGBP (17:50), AUDUSD (19:35), USDCAD (24:12), GBPCAD (26:19), NZDUSD (28:31), USDJPY (30:22), GBPJPY (32:25) and EURJPY (34:52).

GBP/USD – British pound steady on modest GDP growth

USD/JPY – Japanese yen dips to 7-week low, inflation reports next

Commodities Weekly: Gold saved by dollar’s retracement

Kuroda says BOJ sticking to game plan

BOJ to adjust policy to achieve price target

In a speech today, BOJ governor Haruhiko Kuroda vowed to continue to expand the monetary base to maintain the economy’s momentum in order to achieve the BOJ’s price target. He reiterated that the central bank would make necessary policy adjustments to reach that goal.

On the economy, he commented that it is expanding moderately and is expected to do so in the near term. Note: latest GDP data showed the economy contracted by 0.2% in the first quarter of 2018 compared with the last quarter of 2017. So I guess we just look through that Q1 data. USD/JPY basically ignored his comments, sticking to a tight range this morning and sliding a mere 0.03% to 110.435.

Sentiment stays mildly positive in Asia

Asian equity markets took comfort in the higher close on Wall St on Friday and posted modest gains. Robust US non-farm payrolls in June remained that catalyst, while the higher unemployment rate could be explained away by the jump in the participation rate to 62.9% from 62.7%. There was enough ammunition for USD bears in the average earnings numbers, which rose 0.2% m/m rather than the 0.3% expected. This lack of apparent wage pressures saw US yields edge lower, with the US dollar following suit. The Japan225 CFD rose 0.95%, and China50 jumped 2.18%.

For the USD, it’s all about this week’s CPI

GBP’s rise dented by Brexit headlines

News that the UK’s Brexit secretary David Davis had resigned caused a pause on GBP/USD’s rally through 1.33 this morning. Davis cited numerous disagreements over the past year with PM May in his resignation letter, and was of the opinion that the general direction of May’s policy will leave the UK in a weak negotiating position, at best. Later in the session Steve Baker, a minister in the Brexit department followed his boss’s actions. GBP/USD is currently up 0.19% on the day at 1.33084 after touching 1.33231 briefly earlier.

GBP/USD Daily Chart

Source: Oanda fxTrade

Trade war battle has commenced, investors ignore casualties

The first salvo of the US-China trade wars came and went, with both parties announcing like-for-like tariffs. Wall St pushed any implications to the back burner, instead preferring to focus on the jobs data. The next confrontation will likely to be the review on a further $16 billion worth of Chinese goods with no doubt China responding accordingly.

Could the next RBA move be a cut?

In a somewhat contrarian view, a research note from NAB has suggested that higher bank funding costs and tighter credit conditions could mean that the RBA’s next move is a rate cut. They acknowledged that the barrier for a rate cut is quite high, but suggested investors should at least consider some probability that a cut could happen.

In a similar view, a note from Citibank also commented that there is a rising risk that the RBA could remove its guidance for the next rate move to be a hike, citing the global trade situation. Again, it acknowledged that the bar for such a shift is high, and would require the RBA to adjust its growth and inflation forecasts first. Markets are currently pricing in a 25bps rate hike by mid-2019.

Second-tier data

Today’s economic calendar is less than inspiring, with German trade data for May the expected highlight. We also hear central bank speakers in the form of BOE’s Broadbent and the Fed’s Kashkari.

You can see today’s full data calendar at https://www.marketpulse.com/economic-events/

FX Market Analysis – 20 February 2018 (Video)

Senior Market Analyst Craig Erlam discusses this week’s key event risks, with the most notable being the UK jobs report and BoE inflation report hearing.

Craig also gives his live analysis on EURUSD (11:04), GBPUSD (15:13), EURGBP (17:04), AUDUSD (18:36), USDCAD (20:02), GBPCAD (22:01), NZDUSD (24:47), USDJPY (25:44), GBPJPY (26:47) and EURJPY (28:24).

USD/JPY – Dollar Punches Above 107 Yen, Fed Minutes Ahead

Higher Yields Pushing Dollar Up

Intermezzo

USD/JPY – Yen Edges Lower in Thin Holiday Trade

The Japanese yen has posted slight losses in the Monday session. In North American trade, USD/JPY is trading at 106.54, up 0.23% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In Japan, the current account surplus jumped to JPY 0.37 trillion in January, up from JPY 0.09 trillion a month earlier. This easily  beat the estimate of JPY 0.14 trillion. On Tuesday, Japan releases Manufacturing PMI and All Industries Activity.

The US posted sharp housing and consumer confidence reports on Friday, but the dollar failed to make headway against the surging Japanese yen. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points.

The yen enjoyed a banner week, as the currency climbed 2.5% this week. This marked the strongest weekly gain since July. Nervous investors continued to snap up the safe-haven yen, as stock markets across the globe continued to show volatility, draining risk appetite. On Friday, the dollar dropped below 106 yen for the first time since November. If the markets continue to fluctuate during the week, the yen rally could continue.

Bank of Japan Governor Harohiko Kuroda has been reappointed to another 5-year term, the first time a BoJ governor has received a second term in 60 years. The move is a clear message from the Bank that it is no rush to make any change to the massive stimulus program, a key component of Abenomics. Kuroda has made it a priority to raise inflation, but this has proven a daunting task, as inflation is still below of the BoJ’s inflation target of 2%. In this period of strong volatility in the currency markets, Kuroda’s re-election may have a calming effect on the markets. What’s next for the BoJ? With the yen continuing to rise, policymakers may contemplate further easing in order to curb the yen’s value and protect the export sector, which has improved due to stronger global demand.

 

USD/JPY Fundamentals

Sunday (February 18)

  • 18:50 Japanese Trade Balance. Estimate 0.14T. Actual 0.37T

Monday (February 19)

  • There are no Japanese or US events

Tuesday (February 20)

  • 19:30 Japanese Flash Manufacturing PMI. Estimate 55.2
  • 23:30 Japanese All Industries Activity. Estimate 0.5%

*All release times are EST

*Key events are in bold

USD/JPY for Monday, February 19, 2018

USD/JPY February 19 at 11:20 EST

Open: 106.30 High: 106.73 Low: 106.10 Close: 106.54

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.16 104.32 105.53 106.64 107.29 108.00

USD/JPY ticked higher in the Asian session. The pair was flat in European trade. In North American trade, the pair posted small gains but has retracted.

  • 105.53 is providing support
  • 106.64 was tested earlier in resistance and remains a weak line

Current range: 105.53 to 106.64

Further levels in both directions:

  • Below: 105.53, 104.32 and 103.16
  • Above: 106.64, 107.29, 108.00 and 109.11

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (75%). This is indicative of trader bias towards USD/JPY continuing to move higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.