USD/JPY is calm on Wednesday, as the pair in the low-108 range late in the European session. On the release front, today’s highlight is the FOMC policy meeting, with the Fed expected to wind up its QE program. Late Monday, Japanese Preliminary Industrial Production posted a strong gain of 2.7%. There are no Japanese releases on Wednesday.
Japanese data continues to impress this week. Preliminary Industrial Production sparkled in September, with a gain of 2.7%, compared to a reading of -1.5% a month earlier. The estimate stood at 2.3%. Earlier in the week, Japanese Retail Sales was unexpectedly strong in September, climbing 2.3%, its strongest gain since March and well above the estimate of 0.9%. There has been concern about consumer spending in Japan after the sales tax was raised in April from 5% to 8%. The government plans to increase the tax to 10%, but is wary about hurting the economy, which has been marked by modest growth.
The Federal Reserve will be in the spotlight on Wednesday as the US central bank releases its monthly statement. It is widely expected that the Fed will wind up its stimulus scheme, which has been in place since September 2012. Such a symbolic step would mark a vote of confidence in the economy from the powerful Fed. The markets will also be looking for hints regarding the timing of a rate hike, which is expected sometime in 2015. The Fed has noted its concern about the lack of growth in Europe, and a slowdown in China could put a rate hike on hold. Traders should treat the FOMC policy statement as a market-mover which could have a significant impact on the currency markets.
US durable goods looked dismal in September. Core Durable Goods Orders dropped 0.2%, its second decline in three months. This was well short of the estimate of 0.5%. Durable Goods Orders followed suit with a decline of -1.3%. This was a second straight decline, and missed the estimate of 0.4%. There was much better news from CB Consumer Confidence, as the indicator climbed to 94.5 points, up sharply from 86.0 points. This easily beat the estimate of 87.4 and marked a 7-year high. An increase in consumer confidence usually translates into stronger consumer spending, which is a critical component for economic growth.
USD/JPY 108.15 H: 108.23 L: 107.94
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