The yen had a pretty rough week last week. Can this week’s market themes push it back to the top of the forex hill?
Here are potential market-moving events you should watch out for:
Trade balance (Feb 19, 11:50 pm GMT)
Japan clocked in a 55.3B JPY deficit in December, marking the fifth month of deficit in the last six months.
A closer look told us that exports fell by 3.8%, the fastest since 2016, thanks in part to a 7% drop in sales to China. Meanwhile, imports had risen by 1.9% on the back of a 23.9% jump in purchases of U.S. goods.
This week analysts expect to see a 171B JPY surplus for the month of January. If the numbers continue to suggest that weakening demand for exports and global trade tensions are weighing on Japan’s trade activity, then we might see a bit of yen weakness across the board.
Flash manufacturing PMI (Feb 21, 12:30 am GMT)
Manufacturing PMI fell from 52.6 to 50.3 in January. That’s the lowest since August 2016, yo!
Details don’t look much better. For starters, both output and new orders declined for the first time in two and a half years. Joe Hayes, economist at IHS Markit, also pointed out that “total demand declined for the first time since September 2016.” Yipes!
This week market geeks expect to see a teeny tiny improvement from 50.3 to 50.4. Keep an eye out for details on factors like new orders, demand, employment, and output.
While the PMI doesn’t usually set the yen’s weekly themes, it can cause a blip or two among yen crosses at the time of the release. Make sure you’re around to trade any surprises we might see from the report!
Market risk sentiment
What’s another week without trading the yen as a safe haven?
As mentioned in my latest price action review, major themes like the U.S.-China trade discussions and Brexit talks as well as top-tier data releases of other major economies had all influenced the yen at some point last week.
This week the same macroeconomic themes could play out. U.S. and Chinese reps are set to continue their negotiations in Washington. If they make enough progress, then the POTUS could extend the tariff truce as he has hinted last week.
U.K. PM May is also scheduled to meet with European Commission President Jean-Claude Juncker in a bid to win concessions over an Irish border backstop, which is an unpopular topic among members of her party. With only weeks before the U.K. exits the EU, any and all headlines could affect global risk sentiment.
Meanwhile, the forex calendar is peppered with central bank events. The RBA, Fed, and ECB will all publish their monetary policy meeting minutes. In addition to that, officials from the BOC, RBA, Fed, and ECB will also make scheduled speeches within the next couple of days.
Missed last week’s price action? Read JPY’s price recap for February 11 – 15!