Article Highlights

  • BOJ Gov Kuroda’s comments sparked sudden JPY rally
  • Kuroda: Yen’s gains over the past three years have been corrected
  • Japanese core machinery orders up 3.8% y/y vs. estimated 2.0% drop
  • Japan’s producer prices down 2.1% y/y in May as expected
  • Australia’s Westpac consumer confidence index down 6.9% in June
  • RBA Governor Stevens: AUD needs to fall further
  • BOE Governor Carney set to testify today
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BOJ Governor Kuroda led the yen bulls in charging across the forex charts today, as he pointed out that the currency’s gains over the past three years have already been corrected. He added that the real effective exchange rate (which is a fancy way of saying that inflation is taken into account) shows that the yen is still weak, implying that policymakers see no need to jawbone or implement measures to spur further depreciation.

USD/JPY sold off by more than a hundred pips (-1.02%) when Kuroda’s remarks hit the newswires and is testing the 123.00 handle as of this writing. EUR/JPY is 143 pips lower (-1.03%), GBP/JPY is down 170 pips (-0.87%), and AUD/JPY is lower by 102 pips (-1.05%).

The Japanese yen also drew additional support from the stronger than expected core machinery orders report, which printed an impressive 3.8% annualized gain versus the projected 2.0% decline and the previous 2.9% increase. Producer prices marked a 2.1% year-over-year decrease in May as expected.

Consumer confidence weakened considerably in Australia, as reflected by the 6.9% tumble in its Westpac consumer sentiment figure for June. This effectively erases the 6.4% pickup seen in the previous month, setting the stage for potentially weaker consumer spending behavior later on.

As always, RBA Governor Stevens mentioned that the Aussie needs to fall further in order to lend more support to domestic price levels and export activity. He added that the RBA is open to further monetary policy easing but emphasized that the central bank can only do so much when it comes to shoring up growth.

AUD/USD dipped to a low of .7630 after the release but has been able to bounce back to the .7690 area right away (+0.02%). The Aussie is looking slightly weaker against its European forex rivals, with EUR/AUD up 10 pips (+0.08%) and GBP/AUD higher by 30 pips (+0.16%).

Up ahead, the forex calendar suggests that pound traders might take their cues from the release of the U.K. manufacturing and industrial production reports at 9:30 am GMT. Analysts are expecting to see a mere 0.1% uptick from both reports but stronger than expected readings could allow the pound to carry on with its climb. France and Italy are also gearing up to release their industrial production reports which might keep the euro supported if the actual results come in strong.

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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