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USDJPY Below 8-Week High

Daily Analysis - 12/05/2017

US Inflation and Retail Data in Focus As Trading Week Approaches Conclusion

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The US dollar is trading below an 8-week high against the Japanese Yen on Friday, as investors await upcoming economic data pertaining to inflation and consumption which could provide the catalyst for further gains. After reaching a multi-month high of 114.380 back on May 10th, the USDJPY remains under pressure, extending the prior session’s pullback.

Dollar Bulls Take a Breather


After a weak first quarter, investors expect US growth during April-June quarter to have improved significantly. The dollar upside seems capped in the short-term following President Donald Trump's unexpected sacking of FBI Chief James Comey earlier in the week.

The latest political turmoil in Washington has the potential to hamper Trump administration's ability to implement the much-awaited tax reform and fiscal stimulus measures. However, despite the multiple risks, the greenback has still managed to rise 0.80%, largely on account of money flowing out of safe haven assets following Emmanuel Macron’s victory in France's presidential race.

Data on tap Friday include US retail sales figures alongside the consumer price inflation data for the month of April. Should headline and core inflation figures remain above the Fed’s 2.00% target, it could cement expectations of a June rate hike.

After finding support near 113.700, USDJPY has rebounded modestly heading into the European open.

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usdjpydaily05122017

Bank of England Keeps Rates on Hold


In a widely anticipated move, the Bank of England left its benchmark interest rate unchanged at a record low of 0.25% and its quantitative easing programmes capped at GBP 435 billion.

Following Wednesday's Monetary Policy Committee meet, the BoE decided to maintain the monetary policy status quo, despite rising inflation that increasingly calls for a rate hike.

The MPC voted 7-1 in favour of keeping rates on hold, with the hawkish Kristin Forbes being the only dissenter. In addition, the Central Bank's forecast for inflation peaking at 2.80% by the end of 2017 was left unchanged. Inflation has soared in recent months on the back of a plunge in the value of the Pound.

The dip in Sterling has made imports costlier, which in turn, has pushed inflation to 2.30%, a level not seen hit early 2014. In the meantime, FTSE 100 futures are trending lower, falling to around 7350.

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New Zealand Manufacturing Expands at a Slower Pace


Although the sector remained in expansionary mode during the latest period, New Zealand's manufacturing activity eased in April. The Bank of New Zealand performance of manufacturing index stood at a seasonally adjusted 56.8 last month, down 1.2 points from March.

A reading above 50 separates growth from contraction. The production sub-index dipped to 56.9 in April from 60.0 in March while employment was largely flat at 53.0 and new orders fell to 62.4 from March’s 63.2. Deliveries rose to 54.6 compared to the 54.0 record a month prior.

New Zealand’s manufacturing sector has continued its expansionary streak since October of 2012, buoyed by a surge in construction activity after the destruction caused by the Christchurch earthquake.

After limited volatility over the last few sessions, AUDNZD has broken out of a congestion zone to currently trade around the 1.0790-mark.

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Canadian New Home Prices Rise


New home prices in Canada rose at a steady pace in March, led by strength in Vancouver and Toronto amid favorable market conditions.

According to a report issued by Statistics Canada on Thursday, the new housing price index gained 0.20% in March on a month-on-month basis. Market expectations were anticipating a 0.20% increase for the period. On an annualized basis, the index jumped 3.30% in March, with Vancouver and Toronto, two of Canada's hottest property markets, the top contributors to price gains after rising 0.70%, and 0.20% respectively.

The data comes at a time when economists are increasingly weary of a bubble forming, especially in the Toronto-area as real-estate speculators drive prices higher.

USDCAD is largely unchanged in early Friday trade, with the pair edging above 1.3700.

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