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Japan’s GDP and Australia’s quarterly wage reports had limited impact on their respective currencies. Instead, traders focused on overall risk sentiment.

  • Japan’s preliminary Q1 2018 GDP dips by 0.2% vs. 0.0% expected
  • Japan’s Q4 2017 GDP revised lower from 0.4% to 0.1%
  • Japan’s annualized GDP down by 0.6% vs. 0.2% expected, 0.6% previous
  • Japan’s GDP price index up by 0.5% vs. 0.3% expected, 0.1% previous
  • Australia’s Westpac consumer sentiment falls by another 0.6% in May
  • Australia’s quarterly wage price index falls by 0.5%, Q4’s data revised from 0.6% to 0.5%
  • Japan’s industrial production revised higher from 1.2% to 1.4% in April
  • North Korea threatens to cancel June 12 meeting with Trump over pressure to denuclearize

Major Events/Reports:

Japan’s GDP miss

Data printed earlier saw the world’s third largest economy shrinking by 0.2% in Q1 2018. This not only missed estimates of a flat reading, but it also broke an 8-quarter growth streak. Yikes!

The grim figures don’t end there. See, the quarterly growth in Q1 2017 was also revised lower from 0.4% to 0.1%, while annualized growth was adjusted down from 1.6% to 0.6%.

A closer look tells us that household consumption, government spending, and private non-residential investment/business spending made no contributions to overall growth. Meanwhile, private inventories changes weighed on GDP by 0.1%; net exports only added 0.1%, and capital expenditure fell for the first time in six quarters.

North Korea threatens to walk away from June 12 meeting

Earlier today North Korea’s Vice Foreign Minister Kim Gye Gwan took shots at national security adviser John Bolton, who suggested that North Korea go the way of “Libya 2004” where Libyan leader Moammar Gaddafi gave up their nuclear program in return for sanctions relief.

Not a good model for a regime that’s been all about survival. Gwan remarked that:

“This is not an expression of intention to address the issue through dialogue. It is essentially a manifestation of awfully sinister move[s] to impose on our dignified state the destiny of Libya or Iraq, which had been collapsed due to the yielding of their countries to big powers.”

In a statement carried by state media KCNA, Gwan warned that the leadership will reconsider its participation in the DPRK-U.S. summit this June if the U.S. forces “unilateral nuclear abandonment.”

The statement came at the heels of North Korea cancelling high-level talks with South Korea in reaction to its latest joint military exercises with the U.S.

Mixed risk sentiment

I mentioned in my U.S. session recap that higher U.S. Treasury yields and a more hawkish Fed had boosted the Greenback.

Well, the possibility of higher U.S. interest rates weighed on Asian bourses today. Of course, it didn’t help that North Korea threatening to ghost the U.S. in the highly-anticipated June meeting inspired a bit of risk aversion across the board.

  • Nikkei is down by 0.22% to 22,768.0
  • Australia’s A SX 200 is up by 0.40% to 6,120.9
  • Hang Seng is down by 0.11% to 31,116.3
  • Shanghai index is down by 0.28% to 3,183.276

Meanwhile, gold prices still reflected increased demand for the Greenback and oil prices recovered from its dips earlier in the session.

  • Gold is up by 0.28% to $1,293.76
  • Brent crude oil is up by 0.24% to $78.29
  • U.S. WTI is up by 0.20% to $71.11

Major Market Mover(s):

EUR and GBP
EUR/USD is down by 8 pips (-0.07%) to 1.1830
EUR/JPY is down by 15 pips (-0.12%) to 130.48
EUR/CAD is down by 31 pips (-0.20%) to 1.5212

GBP/USD is down by 5 pips (-0.03%) to 1.3498
GBP/JPY is down by 11 pips (-0.07%) to 148.88
GBP/NZD is down by 26 pips (-0.13%) to 1.9652
GBP/CHF is down by 20 pips (-0.15%) to 1.3501

CHF
USD/CHF is down by 10 pips (-0.10%) to 1.0002
EUR/CHF is down by 21 pips (-0.17%) to 1.1832
GBP/CHF is down by 20 pips (-0.15%) to 1.3501
CHF/JPY is up by 7 pips (+0.07%) to 110.27

Watch Out For:

  • 6:00 am GMT: Germany’s final CPI expected to maintain flat reading in April
  • 9:00 am GMT: No revisions expected from euro zone’s 1.2% CPI growth
  • 9:00 am GMT: Euro Zone’s final core CPI expected to remain at 0.7%