Open trading account 
Morning All;it's be a typical slow summer session of trade in the currency market with most of the majors eking out very narrow ranges amidst little speculative flow and no fresh fundamental news.
USD/JPY however continued to struggle as it dipped below the 101.00 level before finally finding some support.
Japanese GDP came in considerably weaker than expected printing at 0.0% versus 0.2% on a quarterly basis and at 0.2% versus 0.8% on an annualized basis. Net exports were a major negative drag on GDP slicing 0.3% off the number. Exchange rates continue to wreak havoc with Japanese exporters efforts and given the recent appreciation of the yen the problem will not improve in the near future.
The market however did not show much a reaction to the data and the pair was actually bid in early open Asian trade as some of the GDP decline was attributed to leap year effects. Stripping out that factor Private consumption actually increased by 1.2%.
Later on however in morning European dealing USD/JPY was pushed lower on reports that the government was negotiating with banks on borrowing at zero rate level. The banks, which serve as the primary source of credit for government short term budget funding needs, have told the government that making tender offers at negative rates would make it difficult for them to finance the operations.
The latest skirmish illustrates the difficulties of BOJ's monetary policy as it approaches the zero bound level. To boot, the BOJ is now top five owner of 81 companies on the Nikkei 225 and by end of 2017 will likely become the largest shareholder of 55 companies on the index as it continues to expand its QE buying program. With so much capital expanded and so little to show for it on both the exchange rate and growth fronts, Japanese officials must becoming increasingly frustrated with their policy choices, yet given the current market conditions there appears to be little that they can do at this to improve the current situation.
Sterling struggles to performLast week, the pound struggled to perform again, losing ground with disappointing data. Manufacturing Production saw a decline of 0.3% while the National Institute of Economic and Social Research (NIESR) GDP estimate fell to 0.3%.Currency exchange rates between Sterling and the US dollar fluctuated, with the pair strengthening on Friday morning following the US retail sales data release, quickly slowing with the stagnation of Fed rate hikes. Meanwhile, investors lightened the GBP ahead of its numerous data releases this week.This week is expected to be a busy one for the pound with volatility in the currency potentially increasing as inflation data, labour market numbers and retail figures for July are all released.
Hope for the euro to remain supported this week.Investors hope that the euro will remain supported this week. The latest results from a German Centre for European Economic Research (ZEW) study show that European Union banks have bigger capital shortfalls than that suggested by the official European Banking Authority (EBA) stress test. This supports the argument that the Economic and Monetary Union’s (EMU) financial institutions are unable to export long-term capital due to their weak balance sheets. This, in turn creates commercial demand for the euro from the EMU’s rising current account surplus dominating, which helps the euro stay supported.Elsewhere, the euro to US dollar exchange rate has stayed relatively stable despite weakness in the dollar.
US Fed hikes put in doubtWeak US data meant that Fed hikes were put in doubt and the search for yields continues. Unfortunately, last week the data was poor and productivity numbers indicated increasingly low potential growth for the economy. Investors have argued that this could make a case for earlier rate hikes and could in fact push the Fed to be extra cautious in light of small inflationary pressures in the economy.On Tuesday the dollar awaits Building Permit results, which are expected to increase by 0.6%, with Housing Starts predicted to decrease by 0.8%. This will then be followed by July’s inflation data that is forecast to show a 0.2% rise month-on-month and 0.9% rise year-on-year.The Real Average Weekly Earnings for July will also be revealed on Tuesday, which are expected to be closely watched for the potential impact on the Federal Reserve’s upcoming policy trajectory.
Further losses for South African rand to Sterling rateFor the fourth week in a row the South African rand to Sterling exchange rate decreased and forecasts expect further losses ahead. By Thursday last week, the pair dropped to year-and-a-half lows but clawed their way back slightly on Friday. Despite this, the ZAR/GBP still ended the week in one of its worst states since the Brexit vote.
Regards All.
USD/JPY however continued to struggle as it dipped below the 101.00 level before finally finding some support.
Japanese GDP came in considerably weaker than expected printing at 0.0% versus 0.2% on a quarterly basis and at 0.2% versus 0.8% on an annualized basis. Net exports were a major negative drag on GDP slicing 0.3% off the number. Exchange rates continue to wreak havoc with Japanese exporters efforts and given the recent appreciation of the yen the problem will not improve in the near future.
The market however did not show much a reaction to the data and the pair was actually bid in early open Asian trade as some of the GDP decline was attributed to leap year effects. Stripping out that factor Private consumption actually increased by 1.2%.
Later on however in morning European dealing USD/JPY was pushed lower on reports that the government was negotiating with banks on borrowing at zero rate level. The banks, which serve as the primary source of credit for government short term budget funding needs, have told the government that making tender offers at negative rates would make it difficult for them to finance the operations.
The latest skirmish illustrates the difficulties of BOJ's monetary policy as it approaches the zero bound level. To boot, the BOJ is now top five owner of 81 companies on the Nikkei 225 and by end of 2017 will likely become the largest shareholder of 55 companies on the index as it continues to expand its QE buying program. With so much capital expanded and so little to show for it on both the exchange rate and growth fronts, Japanese officials must becoming increasingly frustrated with their policy choices, yet given the current market conditions there appears to be little that they can do at this to improve the current situation.
Sterling struggles to performLast week, the pound struggled to perform again, losing ground with disappointing data. Manufacturing Production saw a decline of 0.3% while the National Institute of Economic and Social Research (NIESR) GDP estimate fell to 0.3%.Currency exchange rates between Sterling and the US dollar fluctuated, with the pair strengthening on Friday morning following the US retail sales data release, quickly slowing with the stagnation of Fed rate hikes. Meanwhile, investors lightened the GBP ahead of its numerous data releases this week.This week is expected to be a busy one for the pound with volatility in the currency potentially increasing as inflation data, labour market numbers and retail figures for July are all released.
Hope for the euro to remain supported this week.Investors hope that the euro will remain supported this week. The latest results from a German Centre for European Economic Research (ZEW) study show that European Union banks have bigger capital shortfalls than that suggested by the official European Banking Authority (EBA) stress test. This supports the argument that the Economic and Monetary Union’s (EMU) financial institutions are unable to export long-term capital due to their weak balance sheets. This, in turn creates commercial demand for the euro from the EMU’s rising current account surplus dominating, which helps the euro stay supported.Elsewhere, the euro to US dollar exchange rate has stayed relatively stable despite weakness in the dollar.
US Fed hikes put in doubtWeak US data meant that Fed hikes were put in doubt and the search for yields continues. Unfortunately, last week the data was poor and productivity numbers indicated increasingly low potential growth for the economy. Investors have argued that this could make a case for earlier rate hikes and could in fact push the Fed to be extra cautious in light of small inflationary pressures in the economy.On Tuesday the dollar awaits Building Permit results, which are expected to increase by 0.6%, with Housing Starts predicted to decrease by 0.8%. This will then be followed by July’s inflation data that is forecast to show a 0.2% rise month-on-month and 0.9% rise year-on-year.The Real Average Weekly Earnings for July will also be revealed on Tuesday, which are expected to be closely watched for the potential impact on the Federal Reserve’s upcoming policy trajectory.
Further losses for South African rand to Sterling rateFor the fourth week in a row the South African rand to Sterling exchange rate decreased and forecasts expect further losses ahead. By Thursday last week, the pair dropped to year-and-a-half lows but clawed their way back slightly on Friday. Despite this, the ZAR/GBP still ended the week in one of its worst states since the Brexit vote.
Enjoy your week.
Regards All.