Lots of mid-tier reports from Japan this week! Question is, will they oust risk sentiment as the yen’s major mover?
Japan will be busy churning out lower-tier economic releases over the next couple of days.
The annualized retail sales (Nov. 28, 11:50 pm GMT) is first and it looks like analysts are optimistic with a 2.7% growth expectation for October after September’s 2.2% increase.
Tokyo’s core CPI (1.1% expected vs. 1.0% previous) and Japan’s unemployment rate (2.3% expected and previous) and preliminary industrial production (1.3% expected vs. -0.4% previous) are next on November 29 at 11:30 pm GMT.
Tokyo’s CPI is considered as a leading indicator for Japan’s inflation and the first reading of Japan’s industrial production will be closely watched by those who are worried about a global trade war, so make sure you stick around during the release!
On November 30 at 5:00 am GMT Japan will print its consumer confidence numbers. But while consumer activity is important for Japan’s inflation, traders will likely pay more attention to China’s official manufacturing and services PMIs scheduled a few hours before Japan’s releases.
While these reports don’t tend to dictate the yen’s prices for long, significant hits or misses could cause a blip or two on the yen’s charts.
Overall risk sentiment
Another week, another chance to trade the low-yielding yen in case of risk aversion or risk appetite?
There are plenty of catalysts to watch this week including central banker speeches, OPEC meetings, Fed’s meeting minutes, and updates related to Brexit, Italy’s debt drama, and possible progress for a U.S.-China trade deal in the G20 meetings scheduled at the end of the week.
The yen has been a pretty reliable gauge for risk sentiment in the last couple of weeks, so make sure you watch your charts closely for opportunities to price in significant developments of major economic themes!
Last Week’s Price Review
The yen is mixed for the week but is currently a net winner (as of 9 am GMT), so the yen is still poised for another week of net wins.
The yen’s price action this week was a bit messy, but as the overlay above shows, JPY pairs were taking some directional cues from bond yields as usual.
Also as usual, risk sentiment had a role to play. And an example of this is the yen’s price action during Tuesday’s U.S. session since risk aversion was the dominant sentiment back then but bond yields were turning higher.
And as you can see in the overlay above, the yen continued to gain strength against everything except the Swissy and the Greenback.
As a side note, BOJ Shogun Kuroda spoke before Parliament a few times this week. All speeches were essentially duds, but Tuesday’s speech is worth highlighting since Kuroda touched on monetary policy. And on the topic of adding stimulus, Kuroda said that:
“There’s no need to take additional steps. What’s important is to ensure our policy is sustainable, with an eye on balancing its pros and cons”
However, Kuroda also defended the BOJ’s negative rates:
“I know there is various debate on the BOJ’s negative rate policy. But for the time being, it’s a necessary step that is part of our large-scale monetary easing program.”
Basically, Kuroda’s message is that the BOJ’s monetary policy likely won’t change for some time.