With not a lot of fresh catalysts to move the markets, Asian session forex traders turned to individual economic reports for direction.
- New Zealand’s food price index up by 1.2% vs. 0.8% decline in December
- New Zealand’s inflation expectations up from 2.0% to 2.1% in Q1 2018
- Australia’s Westpac consumer sentiment slips by 2.3% vs. 1.8% gain in January
- Japan’s preliminary GDP (q/q) inches up by 0.1% vs. 0.2% expected, 0.6% previous
- China’s foreign direct investment (ytd/y) rises by 0.3% vs. 7.9% growth in December
Japan’s Q4 2017 GDP
Data from the world’s third largest economy showed a headline miss in its GDP report.
A preliminary estimate showed Japan’s economy growing by 0.1% in Q4 2017, which is slightly lower than the 0.2% expected uptick and the 0.6% gain seen in Q3.
On an annualized basis, the economy expanded by 0.5% against a downwardly revised 2.2% growth in Q3 and the expected 0.9% uptick for the quarter.
Household consumption led the gains with a 0.3% contribution, while capital expenditure (+0.1%) also made a positive contribution. Changes in private inventories took 0.1% from the GDP, while government spending and net exports gave no contribution to growth.
Here are other points you need to know:
- Private consumption: 0.5% vs. 0.4% expected and 0.6% previous
- Business spending: 0.7% vs. 1.1% expected and 1.0% previous
- Private residential investment: -2.7% vs. -1.5% previous
- Government expenditure: -0.1% vs. 0.0% previous
- Exports: 2.4% vs. 2.1% previous
- Imports: 2.9% vs. 1.1% previous
The headline miss spooked yen bulls at first, but market junkies soon cheered the strength of household consumption.
New Zealand’s inflation expectations
Business managers expect inflation to come in at 2.1% over the next two years, in Q1 2018, which is a smidge better than the 2.0% reading back in Q4.
The slight uptick was BFD to Kiwi players especially since Reserve Bank of New Zealand (RBNZ) Assistant Governor John McDermott recently shared that:
“We are very sensitive to inflation expectations, more so than in the past because businesses are more sensitive to current inflation.”
Slight risk aversion in the markets
A strong yen and worries over a weak earnings season weighed on Nikkei, while jitters over Uncle Sam’s inflation release and overall risk aversion kept other Asian bourses under pressure.
- Nikkei is down by 1.25% to 20,979.5,
- Australia’s A SX 200 is down by 0.34% to 5,827.5, and
- Shanghai index is down by 0.30% to 3,175.32 even as
- Hang Seng gained 0.77% to 30,068.6.
Meanwhile, continued dollar weakness extended gold’s rally and oil prices recovered some of their losses from the previous session.
- Gold is up by 0.43% to $1,335.20;
- Brent crude oil is up by 0.40% to $62.79, and
- U.S. crude oil is up by 0.37% to $59.16.
Major Market Mover(s):
The yen took a few steps back at Japan’s headline GDP miss and a bit of jawboning from Chief Cabinet Secretary Yoshihide Suga, but soon left its counterparts eating dust as forex traders started worrying about the U.S. CPI report due later today.
USD/JPY is down by 93 pips (-0.86%) to 106.88;
EUR/JPY us down by 74 pips (-0.56%) to 132.40;
GBP/JPY is down by 103 pips (-0.69%) to 148.71, and
CAD/JPY is down by 56 pips (-0.66%) to 85.04.
An upside surprise in New Zealand’s quarterly inflation expectations woke up the Kiwi bulls during the Asian session.
NZD/USD is up by 50 pips (+0.69%) to .7323;
AUD/NZD is down by 40 pips (-0.57%) to 1.0763;
GBP/NZD is down by 97 pips (-0.51%) to 1.8997;
NZD/CAD is up by 45 pips (+0.49%) to .9203, and
EUR/NZD is down by 64 pips (-0.38%) to 1.6913.
Watch Out For:
- 7:00 am GMT: Germany’s preliminary GDP (q/q) (0.6% expected vs. 0.8% previous)
- 7:00 am GMT: Germany’s final CPI to remain at -0.7%?
- 8:00 am GMT: German Bundesbank President Weidmann to make a speech in Franfurt
- 9:00 am GMT: Italy’s preliminary GDP (q/q) to keep its 0.4% growth?
- 10:00 am GMT: Euro Zone’s flash GDP (q/q) expected to remain at 0.6%
- 10:00 am GMT: Euro Zone’s industrial production (0.1% expected, 1.0% previous)