Asian Session Forex Recap – Nov. 14, 2016

  • Japan’s preliminary quarterly GDP up by 0.5% vs. 0.2% expected and previous
  • U.K. Rightmove house price index slips by 0.1% vs. 0.3% uptick expected, 0.7% previous
  • BOJ’s Kuroda warns of downside risks to inflation and economy
  • China’s industrial production pops up by 6.1% vs. 6.2% expected
  • China’s fixed asset investment up by 8.3% vs. 8.2% expected and previous
  • China’s retail sales improves by 10.0% vs. 10.7% growth expected and previous
  • Japans’ industrial production up by 0.6% vs. 0.0% expected and previous

The Greenback gained a couple more pips against its major counterparts despite the release of better-than-expected reports during the Asian session. What’s up with that?!

Major Events:

China’s data dump – Data from the world’s second largest economy showed industrial production, a broad indicator of factory output, climbing by 6.1% from a year earlier and missing analyst estimates of a 6.2% uptick. Retail sales also missed expectations with only a 10.0% growth from a year earlier in September, down from the expected (and September’s) 10.7% rate.

Last but not the least, fixed asset investment, a proxy for long-term spending, popped up by 8.3% in the January – October period, up from 8.2% in the year to September. A closer look tells us that investment by state firms eased to a 20.5% growth during the time period, down from its 21.1% rate in the first nine months. Meanwhile, private investment, which accounts for 60% of investments in China, picked up from 2.5% to 2.9% in the year to October.

Overall the numbers did little to ease investor concerns about the sustainability of China’s economic recovery. If you recall, China’s economy had expanded by 6.9% in 2015, the lowest in 25 years.

Japan’s GDP surprise – Unlike the Chinese, Japanese traders had a good day after a latest set of reports printed strong numbers for the economy. The industrial production report, for starters, got revised up from 0.0% to 0.6% for the month of August.

More importantly, Japan’s quarterly GDP rose by 0.5% in Q3 2016, higher than Q2’s 0.2% rate and marked the third consecutive quarterly growth. The annualized figures also clocked in a 2.2% growth, faster than the expected 0.9% uptick and 0.7% increase in Q2 2016.

External demand (exports – imports) contributed 0.5% to the GDP, its biggest contribution since Q2 2014, thanks to falling yen and oil prices. Capital expenditure fell flat though, after a 0.1% decline in Q2. Last but not the least, private consumption, which makes up 60% of Japan’s GDP, only rose by 0.1% as bad weather kept consumers indoors.

BOJ on the fence? – The last bit of the report is probably the reason why Kuroda wasn’t all sunshine and butterflies on the economy despite the GDP report.

In a presser, he said that the lack of momentum in private consumption is keeping companies from raising their prices, which puts pressure on the central bank’s inflation goals. The Bank of Japan (BOJ) head honcho urged companies to raise their wages, saying that “the environment for wage increases is certainly well established” after pointing out that corporate profits are nearly at their record highs and that labor market conditions have tightened.

Right now the BOJ seems like it’s on the fence, acknowledging that “the momentum toward achieving the price stability target of 2% seems to have been maintained” but warned that “risks to both economic activity and prices are skewed to the downside” and that “the BOJ will pursue powerful monetary easing and make policy adjustments as appropriate.”

Major Market Movers:

USD – The dollar gained a few more pips against its major counterparts as the post-election trend continued during the Asian session.

EUR/USD is down by 32 pips (-0.30%) to 1.0797, USD/JPY popped up by 54 pips (+0.51%) to 107.41, GBP/USD slipped by another 20 pips (+0.16%) to 1.2562, and USD/CHF is up by 23 pips (+0.23%) to .9915.

JPY – Major yen crosses received a boost today, as it tracked USD/JPY’s break above the 107.00 handle.

EUR/JPY inched 19 pips higher (+0.16%) to 115.98 while GBP/JPY also popped up by 57 pips (+0.42%) to 135.03 and AUD/JPY jumped by 49 pips (+0.61%) to 80.65.

Watch Out For:

  • 9:15 am GMT: Switzerland PPI (0.2% expected, 0.3% previous)
  • 11:00 am GMT: Euro Zone industrial production (-0.9% expected, 1.6% previous)

See also:

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