Geopolitics was once again the main driver of risk sentiment and currency action this week, once again rolling with positive vibes to send the Japanese yen to another losing week against the other major currencies.
Japanese Headlines and Economic data
- A little bit of risk-off global sentiment to start off the week had traders pushing the yen higher against the majors, likely on a combination of weak economic data from China (imports and exports fell more than expected in September) and doubts began to rise on the recent ‘phase 1’ trade agreement between the U.S. and China after China says it wants more talks before signing trade deal with Trump
- BOJ on course to shrink bond pile even as Fed, ECB boost theirs
- Bank of Japan’s Kuroda vows further easing if price momentum lost
- Japan Indices of Tertiary Industry Activity: +0.4% in Aug m/m
- Japan industrial production falls -1.2% in August 2019
- The drop in the Japanese yen during the U.S. trading session was likely on a big reversal in global risk sentiment to positive after news of a Brexit deal between the U.K. and EU was close to being drafted.
- Brexit headlines were once again the dominant market forces during the Wednesday session, first driving traders into safe havens like the yen as doubts on the Brexit deal arose after reports of the DUP not likely supporting the deal. But risk sentiment moved back into the positive by the U.S. trading session as traders saw that a Brexit delay (i.e., avoiding a no-deal Brexit was seen as positive) was still a possibility if the U.K. Parliament could not agree on the new deal.
- More positive risk vibes for the market on this session to send the yen lower further, this time on economic news after a better-than-expected update on Australia’s employment situation. We also got positive rhetoric on the U.S.-China trade negotiation front after China says it hopes to reach phased trade pact with U.S. as soon as possible.