Article Highlights

  • AU CB leading index up by 0.5% vs. 0.4% decline in October
  • AU MI leading index rises by 0.4% vs. 0.0% growth in November
  • Japan’s trade balance shows 0.36T JPY surplus vs. 0.22T expected, 0.47T JPY previous
  • AU quarterly CPI up by 0.5% vs. 0.7% expected and previous
  • AU trimmed CPI remains at 0.4% vs. 0.5% expected
  • NZ credit card spending (y/y) up by 8.5% vs. 4.1% growth in November
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Forex price action was a mixed bag of nuts, as Japan’s trade data, Australia’s inflation numbers, and a spillover from Wall Street’s rally kept Asian session traders busy.

Major Events:

Japan’s trade data – Japan is upping its trade game! Data printed earlier today showed that the world’s third largest economy clocked in a trade surplus of 4.1 trillion JPY in 2016, much, much better than 2015’s 2.8 trillion JPY deficit. What’s more, it also represents the first annualized trade surplus since 2011 when earthquakes and tsunamis forced nuclear power plants to shut down.

Details tell us that exports jumped by 5.4% – the first increase in 15 months – thanks to strong electronics and car parts sales, while low oil prices pushed imports to drop by a faster-than-expected 2.6%. If we consider the full 2016, this means that exports dropped by 7.4% in 2016, the first decline since 2012, while imports shrank by 15.9%.

The report came at a sensitive time when Trump is busy calling out Uncle Sam’s major trade partners over their alleged unfair advantages. Right now Japan’s trade surplus with the U.S. was the largest for any individual trading partner though it already slipped by 4.6% to 6.825T JPY.

Australia’s CPI data – Consumer prices in Australia only rose by 0.5% in Q4 2016 when analysts had expected the report to maintain its 0.7% growth. On an annualized basis, this translates to a 1.5% growth from a year earlier, higher than Q3’s 1.3% but still missing analysts’ expectations of a 1.6% uptick.

The RBA’s trimmed mean CPI rose by an annualized rate of 1.6% after growing by 1.7% in the last three quarters. On a quarterly basis, this translates to an uptick of 0.4% (similar to Q3 2016) when analysts had expected a 0.5% growth.

Price increases were most noticeable on tobacco (+7.4%), automotive fuel (+6.7%), and restaurant meals (+1.1%) while furnishings, household equipment, and services (-0.8%) and communication (-0.8%) took hits.

Meanwhile, the RBA’s closely-watched weighted mean CPI shot up by 1.5% in the three months to December, up from Q3 2016’s 1.3% growth and higher than the expected 1.4% increase. If you recall, the Reserve Bank of Australia (RBA) is targeting a 2.0% – 3.0% inflation growth.

Extended equities rally – As I mentioned in my U.S. session recap, Trump just gave the go signal for the Dakota Access and Keystone XL pipelines projects. Not only that, but he also tweeted about building the highly controversial wall along the Mexican border. The moves excited Wall Street players, who are getting their hopes up that Trump will also fulfil his campaign promises to cut taxes and up Uncle Sam’s infrastructure game. Not surprisingly, the Asian bourses tracked Wall Street’s gains.

The Shanghai index is up by 0.23%, Hang Seng is up by 0.17%, Australia’s A SX 200 is up by 0.27% while Nikkei, hit by Trump’s “wall” tweet but buoyed by Japan’s trade data clocked in a 1.11% gain.

Major Market Movers:

AUD – The inflation miss didn’t do the Aussie any favors, especially since the RBA has been consistently aligning its latest interest rate cuts with CPI releases.

AUD/USD shot up to .7599 before finishing the session 35 pips lower (-0.46%) at .7544. Ditto for AUD/JPY, which reached 86.52 before closing at 85.66 (-0.74%), and AUD/NZD, which fell by 44 pips (-0.42%) to 1.0412.

Watch Out For:

  • 8:00 am GMT: Switzerland’s UBS consumption indicator
  • 10:00 am GMT: Germany’s IfO business climate (111.3 expected, 111.0 previous)
  • 12:00 pm GMT: U.K. CBI industrial order expectations (2 expected, 0 previous)