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The Japanese yen nearly takes the top spot this week, finding support as global risk sentiment stayed mostly negative all week.

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
JPY Weekly Performance from MarketMilk
JPY Weekly Performance from MarketMilk

Japanese Headlines and Economic data

Monday:

Japan GDP surges annualized 21.4% but growth outlook remains weak – Driven by exports, economy grows in July-September for first time in 4 quarters

Japan Industrial production for September 2020: +3.9% m/m; -9.0% y/y – Inventories declined by -0.5% m/m; -5.7% y/y

We saw a spike in volatility for the yen during the European trading session. Likely on a quick rise in positive risk sentiment, sparked by another positive COVID-19 vaccine headline (Moderna says preliminary trial data shows its coronavirus vaccine is more than 94% effective). The risk rally seems to have been limited, likely as traders remembered that cases were rapidly rising and mandatory lockdowns were quickly coming from governments across the U.S. (much of California ordered back into lockdown) and Europe (Germany’s Merkel pushes stricter COVID measures).

Tuesday:

The Japanese yen was a net winner on the session, and with no major catalysts from Japan, it’s likely the broad move higher against the other major currencies was influenced mainly by global risk sentiment.

Traders seemed to be leaning negative on the session with virus restrictions throughout the U.S. and Europe, and concerns of a no-deal Brexit likely outweighed recent positive vaccine news.

Wednesday:

BOJ’s Kuroda says premature to debate reducing its ETF holdings – “If inflation hits our 2% target and an exit from our massive stimulus programme comes into sight, there will certainly be debate on how to end our ETF buying.”

Price action was once again choppy for the Japanese yen, but overall it was a net winner on the session. Broad risk sentiment continued to lean negative of the week’s driving themes, with COVID-19/lockdown fears fueled with headlines of NYC shutting down schools.

Thursday:

Again, no major headlines or catalysts from Japan on the session, which likely explains the low vol, choppy price action on Thursday. Overall, the yen was a net winner against the majors as risk-off themes continued to prevail, supported further by fresh headlines of Brexit uncertainty (Brexit Talks Suspended After Negotiator Catches Covid-19), and then later at the end of the U.S. session when news popped up that U.S.  Treasury Secretary Mnuchin denied the extension of Fed aid programs

Friday:

Japanese flash manufacturing PMI slipped from 48.7 to 48.3

  • ” Operating capacity remained in excess amide weak sales, leading to a faster rate of decline in employment in November.”
  • “Looking ahead, the path to recovery remains fraught with challenges as a renewed rise in the number of COVID-19 cases worldwide could dampen global economic activity and trade, thereby putting Japanese exporters in a tough situation.”

Japan’s consumer prices fall at fastest pace in decade, reviving deflation fears – Nationwide Oct core CPI falls 0.7% y/y as expected

The above updates were likely the main drivers for the yen’s under performance on the session, despite a continued negative lean in broad risk sentiment thanks to this week’s focus of rising COVID-19 cases/hospitalizations/deaths and  economy killing lockdowns.