Slew of Positive Japanese Data Fails to Lift Yen

Daily Analysis - 29/09/2017

USDJPY Holds Ground Despite Brightening Economic Outlook for Japan

A string of better than expected Japanese economic data points failed to boost the Yen against the US dollar, with investors remaining focused on President Donald Trump’s ambitious tax plan. USDJPY was last seen around 112.600 as dollar bulls continue to power the greenback’s recent momentum higher.

Key Data Signals Solidifying Japanese Recovery

Core inflation in Japan accelerated last month, industrial output grew more than forecast and labour demand stayed at its strongest in more than 40 years in further signs of the positive energy unfolding in the world’s third biggest economy.

The core consumer price index, which excludes volatile food prices, gained 0.70% through the twelve months ended in August, matching the median market forecast after a 0.50% increase in July.

Separately, demand for labour remained at its strongest level since 1975, as data showed the jobs-to-applicants ratio holding steady at 1.52 last month. Industrial output also expanded at a better-than-expected 2.10% in August compared to July as manufacturers of autos, construction equipment, and electronic parts increased production.

All told, this positive momentum combined with consumer spending will likely translate to rising inflation over the next few months. After pulling back Thursday, USDJPY is back on the climb towards multi-month highs.

US GDP Growth Revised Higher

The Commerce Department’s final third estimate of second quarter GDP released on Thursday indicated the US economy grew slightly quicker than previously estimated, clocking its fastest pace of expansion in over two years.

Gross domestic product rose at an annualized rate of 3.10% in the April-June period, up from the 3.00% pace recorded last month. The upward revision was primarily due to the value of inventories rising more than the prior estimate.

Last quarter’s growth was the fastest since the first quarter of 2015 and followed a 1.20% rate during the three months ending in March. Economists had projected that second quarter GDP growth would remain unrevised at a 3.00% pace.

Following the selloff that precipitated a session earlier, Nasdaq futures rebounded from Thursday lows to last trade around the 5940-mark.

UK Consumer Confidence Ticks Higher

Sentiment among UK consumers unexpectedly improved to a four month high in September, according to widely-followed monthly survey, suggesting Britons grew more optimistic about the state of their economy.

Market research firm GfK’s long running consumer confidence index ticked up to -9 in September from -10 in August, following a 2-point increase recorded during the previous month while outperforming the consensus estimate of economists forecasting a tumble to -11.

In a statement following the release, GfK observed that consumer confidence rose for the second straight month, although it remained below levels experienced before the June election, when Prime Minister Theresa May and the conservatives lost their parliamentary majority.

The GBPUSD pair is trending lower in early Friday trade to currently hover just above the key support level sitting at 1.3400.

Copper Bounces From Recent Losing Streak

Prices for copper surged on Thursday, helping the industrial remain on track to notch its fifth straight quarterly gain, as expectations of stronger demand from top consumer China lifted investor sentiment.

Early figures on Chinese manufacturing are scheduled for release on Saturday, ahead of the week-long holiday. Factories in the country likely experienced accelerated activity for the 14^th consecutive month in September amidst the year-long construction boom and higher input prices, although the rate of growth may have eased from August.

Copper futures for October delivery are currently trading around $2.9650 a pound after prices rebounded significantly from the lows of last week. On the upside, $2.9750 represents the key resistance, with any breakout above that zone potentially marking the completion of a bullish head and shoulders pattern, which could entice fresh buying pressure.