Not a lot of data on tap from Japan this week, so the yen will most likely take its cues from risk sentiment.
Let’s see which factors can affect the safe haven’s price action over the next couple of days:
Trade balance (Jul 18, 12:50 am GMT)
Japan’s trade deficit clocked in at 967B JPY in May, a bit lower than the 979B JPY shortfall that analysts had expected.
Turned out, exports had fallen by 7.8% from a year earlier and marked the sixth consecutive month of declines. Meanwhile, imports only slipped by 1.5% from a year earlier following a 6.4% annualized increase in April.
This week analysts see Japan printing a 406.0B JPY surplus for the month of June. However, they also see exports dropping by another annualized rate of 5.4% while imports are only slated to decrease by 0.2%.
National core CPI (Jul 19, 12:30 am GMT)
Japan’s core CPI inched 0.8% higher in May, better than the 0.7% expected by markets and a welcome relief after the Bank of Japan (BOJ) had just hinted of additional easing in the foreseeable future.
Not surprisingly, the stronger-than-expected inflation report sent the yen higher against its major counterparts. In fact, it helped boost the currency to its intraweek highs back then!
Will we see another 0.7% increase for the report as many are expecting? There aren’t a lot of other potential market movers scheduled at the same time as the report, so even small hits or misses from the 0.7% uptick could provide volatility for the yen.
Market risk sentiment
The yen’s price action was pretty wonky last week until geopolitics propped it higher across the board.
Let’s see if we get more volatility from geopolitical headlines this week.
In a televised speech over the weekend, Iran’s Rouhani announced that they’re ready to hold talks with the U.S. if the latter removes recent economic sanctions and returns to the 2015 nuclear deal that Uncle Sam nixed last year.
If the U.S. engages Iran on the negotiation table, then we could see risk sentiment improve and the yen slip a bit against its higher-yielding counterparts.
Meanwhile, a few key FOMC members are scheduled to give speeches over the next couple of days. We know from last week’s price action that markets are pricing in an “insurance” rate cut from the Fed.
Question is, what will the members do after that? Will they be ready for another one before the year ends? Or is it a one-and-done deal?
More dovishness from FOMC members could weigh on USD/JPY further, so make sure you stick around in case we get dovish hints from their speeches!
Missed last week’s price action? Read JPY’s price recap for July 8 – 12!