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Risk aversion was the name of the game during the Asian session after North Korea launched a missile that flew over Japan.

  • Japan’s household spending (y/y) down by 0.2% vs. 0.8% expected, 2.3% previous
  • Japan’s unemployment rate remains at 2.8% as expected
  • AU HIA new home sales hits a 4-year low in July

Major Events/Reports:

North Korea fires missile over Northern Japan

The biggest story of the hour is North Korea firing a missile that flew over Northern Japan early in the Asian session.

The hermit kingdom fired a missile that flew over the northern island of Hokkaido just before 6:00 am local time in Japan. The missile was in flight for about 15 minutes and broke into three pieces before falling into the Pacific Ocean about 733 miles off the Japanese coast.

While the Japanese military did not attempt to shoot down the missile, it did prompt sirens and warnings to Japanese citizens to “evacuate to building with strong structure or go to the basement.

Japanese Prime Minister Shinzo Abe has spent 40 minutes on the phone with POTUS Trump since then, and both leaders have agreed to call an emergency UN security council meeting to “increase the pressure towards North Korea.”

The event, which marks the first time North Korea has sent a missile over Japan since 1998, understandably spooked market players.

Nikkei dropped to a 4-month low before settling 0.67% lower at 19,320.00; Australia’s A SX 200 is down by 1.02% to 5,651.80; Hang Seng is down by 0.35% to 27,766.00, and Shanghai index is down by 0.04% to 12,196.82.

Data releases from Japan

The world’s third largest economy actually printed economic reports today even though they were mostly shrugged off after North Korea’s missile hullaballoo.

Household spending unexpectedly fell from a year earlier in July after rising to a two-year high in June. According to the Statistics Bureau, average monthly income per household had risen by 3.5% from the previous year, while average consumption expenditure per household also ticked higher by 1.5% from a year earlier.

Meanwhile, Japan’s unemployment rate remained steady at 2.8% in July. What market players were more interested in was the job openings-to-applicants ratio, which rose for a fifth straight month.

Overall, the increases in job and income prospects were enough for traders to shrug off the slightly lower-than-expected household spending figures.

Major Market Mover(s):

USD

The Greenback’s price action was a mixed bag of nuts, as it lost to the European and fellow low-yielding currencies but gained against the comdolls.

USD/CHF is down by 30 pips (-0.31%) to .9523;
GBP/USD is up by 11 pips (+0.09%) to 1.2940;
AUD/USD is down by 36 pips (-0.45%) to .7928;
USD/CAD is up by 8 pips (+0.06%) to 1.2508, and
NZD/USD is down by 25 pips (-0.35%) to .7230.

JPY

Risk aversion from the launch over Japan’s waters as well as relatively positive data from Japan drove traders into the arms of the low-yielding yen. Yen crosses eventually retraced their moves, however, as soon as trading volume got heavier later into the Asian session.

USD/JPY dropped to a session low of 108.33 before popping back up to 108.82;
EUR/JPY dipped to 129.65 before rising to 130.25;
GBP/JPY plunged to 140.02 before capping the session at 140.83, and
AUD/JPY dropped to 85.71 before settling back up to 86.27.

Watch Out For:

  • 6:00 am GMT: BOJ’s core CPI (y/y) (0.2% expected, 0.3% previous)
  • 7:00am GMT: Germany’s GfK consumer climate to remain at 10.8?
  • 7:00 am GMT: U.K. Nationwide house price index (0.0% expected, 0.3% previous)
  • 7:45 am GMT: France’s consumer spending (0.7% expected, -0.8% previous)
  • 7:45 am GMT: France’s preliminary GDP (q/q) to remain at 0.5% in Q2 2017?