Monday, 14 August 2017

What’s next? – USDJPY 14.08.17

Posted by Valentine at 11:41 Labels:

USDJPY

The dollar/yen was up 0.53 percent as of 08:00 GMT on Monday to trade at 109.75, as the greenback continued to recover across the board despite upbeat economic data from Japan.

The US dollar index, which tracks the greenback against a basket of six major rivals, was trading at 93.17 by the time of this writing, adding 0.22 percent.

Earlier in the session, Japan said its economy expanded in 4.0 percent on yearly basis, outperforming an estimated growth rate of 2.5 percent. Last quarter, the Nippon gross domestic product rose by 1.0 percent, comfortably above a forecasted 0.6 percent build.

These figures support the yen, making Japanese goods more expensive for international clients and therefore, pushing equity markets to the downside.

Ahead this week, attention will be directed to the release of Fed’s latest meeting minutes on Wednesday, as traders search for hints on the timing of the next interest rate hike.

According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 42.2 percent probability of a third 25-basis points rate increase by December.

The US Labor Department said on Friday consumer prices rose by 0.1 percent in July, missing expectations for a 0.2 percent build. With such result, the annual CPI increase stands at 1.2 percent, which is still far from the US central bank 2.0 percent target.

Inflation and labor market conditions are two key elements for the Federal Reserve to justify further interest rate moves as part of its monetary policy normalization process.

As this pair is widely affected by risk-on/risk-off sentiment, we expect no intense movements until a clear direction is defined over the Korean geopolitical crisis. The situation is so far unstable and therefore, we suggest a cautious positioning in this market.

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