With no new catalysts to price in, Asian session traders turned to prevailing as well as currency-specific catalysts for volatility.
- Japan’s preliminary GPP (q/q) up by 0.5% vs. 0.3% expected, -0.2% previous
- Japan’s PPI (y/y) jumps by 3.1% vs. 2.9% expected, 2.8% previous
- Japan’s preliminary GDP price index (y/y) inches 0.1% higher vs. 0.0% expected, 0.5% previous
- Japan’s tertiary industry activity declines by 0.5% vs. -0.2% expected, 0.2% previous
Japan’s GDP beat
The world’s third largest economy grew by a solid 0.5% in Q2 2018 after seeing a 0.2% contraction in the previous quarter.
Preliminary numbers also show broad-based growth. Private consumption, which makes up 60% of the economy, shot up by 0.7% while capital expenditures rose by another 1.3% when analysts had only seen a 0.6% increase.
External demand was more iffy, however. Net trade activities took 0.1% from overall GDP against expectations of a 0.1% uptick.
While a lot of investors cheered today’s release, others worried that (a) it won’t be enough to budge the BOJ from its dovish forward guidance and (b) a grim global trade outlook will soon weigh on growth anyway.
Remember the meeting between U.S. Trade Representative Robert Lighthizer and Japanese Economy Minister Toshimitsu Motegi failed to produce any bilateral trade agreements this week. Instead, Japan stuck to its position of preferring multilateral free-trade agreements over bilateral ones.
Mixed market reaction
There were no fresh catalysts to rock the Asian markets today, so traders went back to worrying over global trade concerns despite speculations that the Chinese government will step in to protect its own interests in the U.S.-China trade war.
- Nikkei is down by 0.50% to 22,485.7
- A SX 200 is down by 0.21% to 6,281.5
- Shanghai index is down by 0.14% to 2,790.530
- Hang Seng is down by 0.46% to 28,474.4
Commodity prices were a little more mixed, with gold taking hits on the back of Greenback demand. Meanwhile, crude oil traders finally priced in China removing the Black Crack from its tariff list in the trade war.
- Gold is down by 0.02% to $1,212.12
- Brent crude oil is up by 0.24% to $72.17
- U.S. WTI is up by 0.26% to $66.83
Major Market Mover(s):
Overall risk aversion once again pushed the low-yielding yen to the top of the hill. Of course, it didn’t hurt that Japan’s GDP printed much-better-than-expected results.
USD/JPY is down by 22 pips (-0.20%) to 110.86; CHF/JPY is down by 24 pips (-0.21%) to 111.55; EUR/JPY is down by 22 pips (-0.17%) to 127.82; GBP/JPY is down by 18 pips (-0.13%) to 142.23, and NZD/JPY is down by 15 pips (-0.21%) to 73.31.
There were no catalysts to push the Aussie lower, though weaker Chinese markets might have weighed on the correlated comdoll.
AUD/USD is down by 7 pips (-0.09%) to .7366; AUD/JPY is down by 23 pips (-0.28%) to 81.66; EUR/AUD is up by 20 pips (+0.13%) to 1.5652; GBP/AUD is up by 25 pips (+0.14%) to 1.7416, and AUD/CHF is down by 6 pips (-0.08%) to .7320.
TRY and RUB
I don’t always feature exotic currencies but when I do, it’s because they’re seeing cray moves!
The Turkish lira (TRY) fell to a record low against the Greenback after a meeting between Turkey’s delegates and U.S. officials in Washington yielded no resolution to the countries’ diplomatic rift. It’s trading at 5.5700 as of 12:21 am GMT.
The Russian rouble (RUB) also plummeted to as low as 66.7099 roubles to a dollar, which is near lows not seen since late 2016, after the U.S. slapped sanctions on Russia over a nerve agent used on a former Russian agent and his daughter in Britain.
Watch Out For:
- 6:45 am GMT: France’s industrial production (0.5% expected, -0.2% previous)
- 6:45 am GMT: France’s preliminary private payrolls (q/q) (0.3% expected, 0.2% previous)
- 8:00 am GMT: Italy’s trade balance (3.41B EUR expected, 3.38B EUR previous)
- 8:30 am GMT: U.K.’s MONTHLY GDP report (0.2% expected, 0.3% previous)
- 8:30 am GMT: U.K.’s manufacturing production (0.3% expected, 0.4% previous)
- 8:30 am GMT: U.K.’s preliminary GDP (q/q) (read our mini trading guide about it!)
- 8:30 am GMT: U.K.’s goods trade balance (-12.0B GBP expected, -12.4B GBP previous)
- 8:30 am GMT: U.K.’s preliminary business investment (q/q) (0.3% expected, -0.4% previous)
- 8:30 am GMT: U.K.’s construction output (-0.2% expected, 2.9% previous)
- 8:30 am GMT: U.K.’s industrial production (0.4% expected, -0.4% previous)