During the NY session we saw stocks and JPY crosses higher after an equity investment in Citigroup but the stock finished lower for the day. It seems that Asia is following the suspicion that the worse may not be over as the Nikkei traded lower and the JPY crosses trickled lower. USD/JPY ran through 109.00 into the NY close but only found sellers in Asia as it traded back through 108.50. EUR/JPY was also notably weak helped in part by EUR/USD which has made several attempts toward 1.4850 only to find good offers.
Japanese retail sales may be part of the reason for the weakness in the JPY crosses. Retail sales came in at .8% year over year in line with expectations but the Japanese government changed their view of the data from ‘almost flat’ to ‘recovering.’ Is Japan finally rising from the depths of deflation? Higher commodity prices may be helping to reinflate prices while a higher Chinese Yuan may be helping to make Japanese exports more competitive.
Looking forward, there is still a fair amount of data this week. There are a couple of releases in Europe but look for the market to be more focused on US housing data and the Philadelphia Fed report. Later this week, we are expecting Japanese inflation and employment data, two reports that could further build the case for a higher JPY.
Upcoming Economic Data Releases
- Germany: (2:10am ET) Gfk Consumer Confidence Survey expected 4.4 vs. previous 4.9.
- Switzerland: (5:30am ET) KOF Swiss Leading Indicator expected 1.98 vs. previous 2.02 (relevance: low).
