Japanese Factory Growth Decelerates

Daily Analysis - 24/03/2017

Worsening Business Confidence and Weaker Orders Dent Manufacturing Activity


Japanese factory activity expanded at a much more tepid pace in March compared to the prior month amid a slowdown in new order growth. The Markit/Nikkei Japan Flash Manufacturing PMI dropped to 52.6 in March from 53.3 in February, short of market expectations of 53.5 while marking the lowest reading since December.

Bank of Japan Intends to Continue with Stimulus

With fundamentals continuing to show an uneven trajectory, Bank of Japan Governor Haruhiko Kuroda reiterated that the central bank had no intention of withdrawing the massive monetary stimulus anytime soon in comments overnight.

Given that inflation continues to remain way below its 2.00% target, bond purchases and yield targeting are likely to continue until the outlook stabilizes.

Kuroda further added that while business conditions were improving in Japan, downside risks remain significant, with broader economic activity not strong enough to drive inflation higher.

The Bank of Japan had restated its short-term interest rate target of -0.10%, and pledged to guide the 10-year government bond yield closer to 0.00% after the March 16th policy decision.

USDJPY has bounced of a four-month low in Friday trade, and was last seen trading below 111.350.


Euro Area Consumer Confidence Rises

Consumer confidence in the Euro Zone managed to gain 1.2 points March, falling only by to -5.0 according to data released late Thursday, topping consensus market forecast of a more modest improvement to -5.7.

The wider measure of the European Union, which includes 28 nations, saw consumer confidence increase 1.0 point to -4.2. Published by the European Commission, the March flash estimates indicate that the negative sentiment amongst Euro Zone consumers is subsiding at a faster clip than what economists were anticipating.

Nevertheless, the slight advance failed to spur investor optimism, with market participants seeing little reason to buy into the common currency following the mixed signals from the European Central Bank’s latest Economic Bulletin.

EURUSD is continuing to fall in early Friday trade, with the pair perched just above the 1.07650-mark.


US New Home Sales Climb to 7-Month High

Sales of new single-family houses in the United States increased in February to a 7-month high, suggesting the impact of recent surge in borrowing costs on the residential real estate has been limited.

Data compiled by the US Commerce Department reported that sales jumped 6.10% to a seasonally adjusted annual pace of 592,000 in February. The median forecast of economists surveyed by Bloomberg called for a 564,000 seasonally adjusted rate.

Resilience in the jobs market and improving household balance sheets have continued to support demand and help buyers withstand higher mortgage rates.

Meanwhile, the inventory of new homes available for sale stood at 266,000 at the end of February, with a median sales price of around $296,200 as demand continues to outpace supply growth.

After falling modestly on Thursday, S&P 500 June futures are largely flat on Friday, trending around 2345.


UK Retail Sales Rebound

Following three straight months of decline, retail sales in the United Kingdom managed to rebound in February.  However, as evidenced by the data, the underlying trend remained weak, implying the sector was unlikely to make a major contribution to first quarter economic activity.

Figures produced by the Office for National Statistics reported that sales last month grew by 1.40% on a month-over-month basis, largely on the back of strong sales of household goods.

However, sales for the three months ending February dipped -1.40%, marking the fastest rate of decline in almost seven years.

Economists reckon that as wage growth struggles to keep pace with the “Brexit”-induced inflation, shoppers will likely continue to curb their spending.

GBPUSD is falling in early Friday trading, and currently hovering below 1.24800.


Upcoming Events

  • Time
  • Currency
  • Event
  • Forecast
  • Previous
  • 08:30 GMT
  • EUR
  • Preliminary German Manufacturing PMI (March)
  • 56.5
  • 56.8
  • 09:00 GMT
  • EUR
  • Preliminary Manufacturing PMI (March)
  • 55.3
  • 55.4
  • 12:30 GMT
  • USD
  • Durable Goods Orders MoM (February)
  • 1.20%
  • 2.00%
  • 12:30 GMT
  • USD
  • Core Durable Goods Orders MoM (February)
  • 0.50%
  • 0.00%
  • 12:30 GMT
  • CAD
  • Core CPI YoY (February)
  • 1.70%
  • 12:30 GMT
  • CAD
  • CPI YoY (February)
  • 2.10%
  • 2.10%
  • 13:45 GMT
  • USD
  • Preliminary Manufacturing PMI (March)
  • 54.8
  • 54.2

This website uses cookies to ensure best possible user experience. Read more