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The Japanese yen flips the script this week by taking the top spot against the majors, likely on a big shift in global risk sentiment.

Overlay of Inverted JPY Pairs & US10Y Bond (Black Line): 1-Hour Forex Chart
Overlay of Inverted JPY Pairs & US10Y Bond (Black Line): 1-Hour Forex Chart

Japanese Headlines and Economic data

Major Market Drivers for the Japanese Yen

Global risk sentiment and counter currency drivers were likely the main influence on the Japanese yen this week as Japanese data was relatively light and low tier, and the BOJ headlines didn’t seem to bring much reaction on Japanese yen pairs. But one period of uniformity off of Japanese catalysts could be argued for the Friday morning Asia session. We got a string of Japanese economic updates that we’d argue were net positive, highlighted by the better-than-expected final read on fourth quarter GDP, the current account and household spending updates. Japanese yen pairs proceeded to broadly rally after the data was released while U.S. bonds stayed relatively flat, suggesting that risk sentiment was likely not a driver for the move in yen pairs at that time.

As for the rest of the week, global risk sentiment was the likely driver for Japanese yen pairs, which looked like nothing but a straight move from the lower left to the upper right of the one hour chart above of yen pairs and the U.S. 10yr treasury bond. And the theme that likely had yen bull marching higher without missing a beat this week was global growth concerns. With a lack of the positive U.S.-China trade negotiation updates that we’ve seen in recent weeks to spark some optimism, it seems that global traders are finally taking notice of the weak economic data that’s been flowing over the past couple of months.

This week was no exception and it seems like the focus was global trade, and how it seems the whole system is slowing down rapidly. It started off with very weak manufacturing PMI data South Korea and services PMI data from China, followed by Canada and the U.S. posting weak trade balance data, with the latter hitting a record $891B deficit in 2018.  The trade updates of the week ended with China posting a significant fall in its trade surplus as exports fell more than 20% in February.

Outside of global trade, it wasn’t all gloom and doom, but the economic highlights of the week were negative ones including a disappointing read on Australian GDP (likely raising the odds of RBA rate cuts this year) and the very disappointing update on the U.S. employment situation, coming in lower at a net 20K new jobs added versus the expectations of around 180K new jobs and a 311K previous read.

Finally, let’s not forget that there were three major central bank monetary policy meetings this week (the Bank of Canada, the Reserve Bank of Australia, and the European Central Bank). The RBA was relatively optimistic despite risks from weak household income and falling house prices in Australia, the Bank of Canada pulled back a bit from the possibility of raising rates, and the ECB was so dovish on the economy that they introduced another round of bank stimulus, straight up spooking traders out of the euro this week. To sum it up, all three banks sounded dovish on the global economic outlook, which likely played into the risk-off mood that grew this week to strengthen safe haven assets like the Japanese yen and global bonds into the weekend.