The Japanese Yen Finds Support as the USD sees Red

Lighter volumes have seen the Dollar pullback through the early part of the day. While the majority of the major markets are closed today, some moves are to be expected, with inflation figures out of the Eurozone due out shortly. · FX Empire

Bob Mason

Updated Thu, Mar 29, 2018, 11:30 PM

Earlier in the Day:

Economic data released through the Asian session this morning was limited to data out of Japan, with many of the major markets closed for Good Friday.

Stats out of Japan included Tokyo inflation numbers for March, together with February’s jobs / applications ratio and prelim industrial production figures.

The data was skewed to the negative, with core inflation easing from 0.9% to 0.8% year-on-year, the jobs to application down from 1.59 to 1.58, while industrial production increased by 4.1% according to prelim figures, falling short of a forecasted 5.1% increase, following January’s 6.8% slide.

February’s industrial production increase was attributed to a rise in the production of transport equipment, production and business oriented machinery and electronic part and devices, while a drag to the numbers came from the production of petroleum and coal products, textiles and ceramics, stone and clay products.

The latest numbers eased concerns of a possible slowdown in the Japanese economy in the 1^st quarter, with industrial production forecasts for March that were revised from a 2.7% decline to a 0.9% rise and for April’s forecasted rise by 5.2% adding to the upbeat optimism.

For inflation, the softer Tokyo number will be used to project weaker national figures for March, as the recent resurgence in the Yen pins back hopes of a near-term move towards the BoJ’s 2% target, the Japanese Yen up 5.56% against the U.S Dollar, year-to-date.

On the labour front, the February’s unemployment rate ticked up to 2.5% from January’s 2.4%, while falling short of a forecasted 2.6%, with the jobs / applications ratio falling from 1.59 to 1.58, coming in below a forecasted increase to 1.60.

While the figures were negative, sentiment towards labour market conditions remains positive, the only real issue being a lack of upward pressure on wage growth. The markets will be waiting for April’s review and proposed wage growth figures, with the Japanese Prime Minister having pushed Japanese companies to support the economy with higher wages for some time now.

If wage growth does begin to materialize next quarter and the Japanese government manages to avoid punitive tariffs, the rest of the year will be looking quite upbeat, though a trade war between the U.S and China would also need to be put on ice.

The Japanese Yen moved from ¥106.461 to ¥106.471 upon release of the figures, before making a move on the U.S Dollar, up 0.19% to ¥106.23 at the time of writing.

Elsewhere, the Aussie Dollar was up 0.07% at $0.7683, while the Kiwi Dollar was down 0.08% to $0.7228, volumes on the lighter side through the session.

In the equity markets, with the Hong Kong and Australian’s markets closed, it was down to the Nikkei and CSI300, with the pair up 1.22% and 0.11% respectively, at the time of writing, as the Nikkei responded to favorable stats this morning and an easing in the Yen through the week, with the CSI300 treading water ahead of March manufacturing PMI numbers due out tomorrow.

The Day Ahead:

For the EUR, economic data scheduled for release today is limited to prelim March inflation figures out of France and Italy and February consumer spending figures out of France.

With many of the Eurozone member state markets, including those of Italy and France, closed for Good Friday, volumes will be on the lighter side, with any material uptick in inflation and positive consumer spending figures likely to give the EUR quit a jump this morning.

At the time of writing, the EUR was up 0.11% to $1.2313 .

Across La Manche, there are no material stats to be considered out of the UK through the day and, with the UK markets closed for today and on Monday, volumes will be on the lighter side, which should leave the Pound relatively range bound barring any scathing news on Brexit hitting the wires.

The Pound’s slide back to $1.40 levels off the back of some weak data and a resurgent Dollar has led to some buying appetite, with the longer-term outlook remaining upbeat, assuming there are no curveballs from the EU on the terms under which Britain will leave the EU.

At the time of writing, the Pound was up 0.09% to $1.4030.

Across the Pond, the Dollar Spot Index was in reverse through the Asian session, down 0.17% to 89.994, with even the year-on-year uptick in the Core PCE Price Index to 1.6% doing little to rattle the market’s cage overnight.

There’s still plenty in the way of a Dollar rebound going into the 2^nd quarter, with concerns over the ever growing fiscal deficit, a possible trade war and general uncertainty over the U.S administration’s foreign policies pinning back the Dollar, which is likely to be much to the satisfaction of the U.S President. Another tick in the campaign trail check list…

This article was originally posted on FX Empire