Japanese Trade Momentum Accelerates

Daily Analysis - 20/09/2017

Import and Export Growth Helps Keep Balance in Surplus Territory

In another positive sign for the Japanese economic outlook, trade continued to advance during the month of August, with outbound shipments reaching their swiftest growth velocity in almost four years as a competitive Yen helps local exporters.

Japanese Exports Expand by Fastest Pace Since 2013

A combination of a steadier but weaker Yen has helped propel the nation’s export economy to the quickest rate of growth in nearly four years, capping off 9-straight months of increases in the figure.

The momentum behind the 18.10% annualized gain in exports was attributed to the pickup in chemicals, manufacturing goods, machinery and transportation equipment, helping push the surplus well beyond the consensus estimate for the period.

In addition to the increase in exports, imports also rose more than forecast through the 12 months ended in August, climbing 15.20% year over year. The trade balance came in above the levels projected, with the JPY 114 billion surplus bolstered by a revision higher in July’s surplus to JPY 422 billion compared to the JPY 419 billion originally reported.

After closing mostly unchanged on Tuesday, USDJPY is falling in early Wednesday trade, trending back below 111.500.

US Housing Sector Data Remains Mixed

The residential real estate market managed to show progress after substantial weakness in July, with both US building permits and housing starts unveiled on Tuesday advancing despite the troublesome backdrop.

The -4.10% contraction in permits for new construction was completely reversed by a 5.70% gain in August according to figures published by the US Commerce Department. Approvals for multi-family housing units jumped 22.80% while single-family units fell by -1.50% over the same period.

However, despite the pickup in permit authorizations, residential real estate projects breaking ground declined by -0.80% during August, extending losses from the prior month which experienced a decrease of -2.20% in overall new building activity.

While the impact of Harvey was relatively limited, Irma may have a more significant influence on September’s numbers as rebuilding efforts begin. US equity benchmarks continued their recent advance, with the S&P 500 reaching a new intraday record on Tuesday.

Peso Slips as Powerful Earthquake Strikes Mexico

A crushing earthquake swept through Central Mexico on Tuesday, causing widespread damage across the country and killing scores of people.

The 7.1 magnitude quake was the second such event in the last two weeks, with the destruction caused in the wake of the latest event flattening buildings and causing massive power outages throughout the country as it works to recover.

This was the most powerful seismic event experienced in the country in years, causing the highest death toll since the 1985 quake. Rescue efforts are already underway and no subsequent tsunami is expected,, although as the power comes back online, more reports of collapsed infrastructure are likely forthcoming.

The Peso exhibited a limited reaction to the development, sliding modestly against the US dollar as the USDMXN pair edges towards 17.8000.

Gold Rebounds as Trump Aims Fiery UN Rhetoric at North Korea and Iran

In his first speech to the United Nation’s General Assembly, US President Donald Trump took aim at North Korea’s nuclear ambitions and Iran’s spirit in upholding its own nuclear deal agreed upon with the Obama administration.

He caught many foreign leaders by surprise after reaffirming his “America first” commitment in what was deemed a drastic break in policy from his predecessors. In a direct threat to North Korea, Trump pledged to destroy the country should it continue with the missile development activities that have terrified neighboring countries.

He also leveled significant criticism towards the Iran deal, threatening to tear it apart. The losses in gold on the heels of quieted rhetoric over the weekend were reversed on Tuesday as the yellow metal managed to find some support, with the haven asset climbing to just shy of $1315 per troy ounce before pulling back.