The Japanese yen takes the top spot this week, beating all the majors as the “reopening trade” fades to send traders away from risk assets.
We also saw arguably net better-than-expected economic data from Japan to potentially support the yen this week.
Japanese Headlines and Economic data
Monday:
Japan’s April current account surplus down 84.2%
Japan’s economy watcher sentiment up for first time in four months but still hovers near lows
Japan’s Service Sector Sentiment Rises 7.6 Points in May
We saw a pop higher in the yen during the U.S. trading session, and with no direct catalysts from Japan, it’s tough to say why as broad risk sentiment was still positive then.
Is the broad rally higher could have been U.S. traders reacting to the better-than-expected Japanese data? Or maybe a risk sentiment reaction to a negative global outlook from the World Bank?
Tuesday:
Japanese average cash earnings dipped 0.6% vs. projected 1.0% drop
We saw yen strength in the early London session, possibly off of weaker-than-expected European trade data (e.g., German Exports in April 2020: -31.1% on April 2019) or geopolitical tensions (North Korea cuts communications with South Korea, Pompeo demands Iran release US detainees, urges Libya ceasefire)? But during the U.S. session the Japanese turned lower, possibly on rising risk-on sentiment after the WHO’s makes a U-turn on asymptomatic transmission.
Wednesday:
Japan’s machinery orders, wholesale prices sink as pandemic hits business spending
Japan Producer prices index fell -0.4% m/m
A strong broad move higher for the yen against the majors late in the U.S. session, likely on risk-off sentiment sparked by a dovish Fed outlook on the economy.
Thursday:
Japan’s BSI manufacturing index slipped from -17.2 to -52.3 vs. -20.5 consensus
Yen’s strength continued into the Thursday session off of the FOMC event. Negative global risk sentiment accelerated during the US session, likely on fears of a second wave (Florida Reports Highest Daily Increase in Coronavirus Cases Since Outbreak Began) are added on top of the Fed’s dismal outlook to worry about.
Friday:
Japan Industrial production: -9.8% m/m for April vs. -9.1% previous
Positive global risk sentiment recovers during the Asia and London trading sessions (possibly profit-taking?) to send the yen lower, but swings back to negative later to secure the yen’s gains for the week as fears continue to rise of a second wave and a re-implementation of lockdown protocols (CDC warns U.S. may reimplement strict coronavirus measures if cases go up ‘dramatically’).