Asian Session Recap – Aug. 29, 2014

  • Japanese household spending down by 5.9% y/y vs. estimated 2.7% decline
  • Tokyo core CPI down from 2.8% to 2.7% as expected
  • National core CPI unchanged at 3.3% as expected
  • Japanese jobless rate up from 3.7% to 3.8% in July
  • Japan’s preliminary industrial production showed mere 0.2% uptick m/m
  • Japanese retail sales up by 0.5% vs. expected 0.1% decline
  • New Zealand ANZ business confidence down from 39.7 to 24.4
  • Australia’s private sector credit up by 0.4% vs. estimated 0.5% increase
  • Euro zone CPI flash estimates due

Despite weaker than expected data from Japan, the yen summoned its samurai powers and put up a good fight against its forex counterparts. The July figures were mostly below estimates, adding fuel to speculations that the BOJ would need to ease again sooner or later.

Household spending fell by 5.9% year-over-year, almost twice as much as the previous 3.0% decline, although retail sales had a stronger than expected 0.5% uptick. The jobless rate climbed from 3.7% to 3.8% instead of holding steady. Preliminary industrial production printed a meager 0.2% increase versus the projected 1.2% rebound while the previous month’s figure was downgraded to show a larger drop in production, reflecting how weak external demand is taking its toll on industrial activity.

Yen pairs jumped after the bleak figures were released, with USD/JPY popping up to a high of 103.84 and GBP/JPY landing back above the 172.00 handle and trading to a high of 172.21. Against the comdolls, the yen managed to stay strong, as AUD/JPY continued to consolidate around 97.00 while NZD/JPY edged down to 86.75.

Weaker business confidence in New Zealand may have weighed on the Kiwi, as ANZ reported that its index slipped from 39.7 to 24.4 this month. In Australia, private sector credit rose by only 0.4% instead of the estimated 0.5% gain, lower than the previous 0.7% increase. AUD/USD retreated to the .9350 minor psychological support in the past few hours while NZD/USD dipped to a low of .8358.

The euro could steal the show in today’s London trading session, as the euro zone is set to release its CPI flash estimates. Bear in mind that ECB head Draghi has been concerned about weak inflationary pressures and that the latest CPI data from the region’s largest economies have failed to impress. The headline CPI forecast for the month could be dropped from 0.4% to 0.3% while the core CPI estimate could hold steady at 0.8%. Expectations of weaker inflation could revive talks of further easing from the ECB, which might push the euro lower against its forex counterparts.

Also due today are German retail sales data and the U.K. Nationwide HPI, which might show a measly 0.1% gain in house prices. Do watch out for the release of Switzerland’s KOF economic barometer as well, with the index likely to dip from 98.1 to 97.9.

See also:

U.S. Session Recap

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