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Idea of the Day

We talked last week about how the dollar was not quite going to plan in the current quarter and one of the reasons it has not appreciated in the manner expected has been the strength of the yen. The Upper House elections were meant to pave the way for a fresh period of yen weakness, but as it is we’ve seen the yen outperform on the majors since that date by a considerable margin.

The latest GDP data have added to the perception that the impact of Abenomics is falling short of that anticipated by the market, the economy expanding by a weaker than expected 0.6% QoQ. The other factor is that investment spending continues to fall at a time when government policies were meant to be encouraging firms to invest on the basis of the better prospects for future growth. For now at least, firms are not quite buying into it and neither is the yen.

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Data/Event Risks

FX:  No data of note for Monday.

JPY:  Focus for Tuesday will be machine orders and more so the minutes to the July BoJ meeting, which could give more indications of the BoJ’s propensity to offers more stimulus measures.

Latest FX News

JPY:  The latest GDP data for Q2 suggesting that Abenomics is not having the desired effect, growth expanding 0.6% on QoQ basis, vs. expectations of 0.9% gain. Investment spending was again weak. USDJPY pushed below the 96.00 level briefly, but has since recovered to trade around the 96.50 level

AUD:  Moving into election mode over the weekend, with the first of the PM candidate debates. The current PM sits behind in the polls and it’s only if the gap closes that events are likely to be of more significance for the currency. The Aussie a little steadier so far today after last week’s strong corrective move to the 0.9200 level.

EUR:  Focus on growth this week, with data expected to show Eurozone moving out of recession. Today, GDP data for Spain has shown a 0.1% QoQ increase in Q2, after -1.0% in Q1. Eurozone GDP released Wednesday. EUR has held below the 1.34 level in Asia trade.

Further reading:  

Canadian loses almost 40K jobs – USD/CAD leaps

It seems that currency markets have ruled out a Septaper