Japan’s Consumer Prices Up for an 8th Month ahead of Carney, Draghi and a Heavy Economic Calendar to Drive the EUR, GBP and the USD

Earlier in the Day:

Macroeconomic data through the Asian session was on the heavier side this morning, with stats out of Japan including August’s household spending, retail sales, prelim industrial production and inflation numbers.

While data out of Japan was mixed, the numbers were relatively upbeat, with industrial production coming in better than forecasted, household spending recovering from July’s weak numbers and inflation picking up, though certainly not to any levels that could lead to a shift in the BoJ’s current stance on monetary policy.

The Yen eased back through the release of the data, with the Dollar looking to claw back Thursday’s losses in the early part of the day, the Dollar up 0.28% at ¥112.65 at the time of writing.

For the Aussie Dollar, stats out of Australia were limited to August private sector credit figures, which were in line with forecasts, rising by 0.5%, though the figures had little influence on the AUD, which struggled through the session off the back of a U.S Dollar revival.

The RBA has continued to raise concerns over rising household debt and, while the RBA Governor talks up the economy and the prospects of a shift in monetary policy, a continued build-up of household credit would certainly complicate matters should the RBA begin to lift rates, with consumer consumption and economic growth prospects at risk. Ultimately, the RBA will need to curb ever increasing debt piles however and it will be interesting to see how the RBA looks to manage this in the coming months. Strong economic growth prospects certainly makes it a less bitter pill to swallow.

At the time of the report, the AUD was down 0.23% at $0.7838, with yield differentials narrowing in favour of the U.S Dollar.

With U.S equities closing out in positive territory on Thursday and this morning’s stats out of Asia relatively upbeat, appetite for riskier assets continued to improve, with the Hang Seng and ASX200 moving ahead on the final day of the quarter, with the softer Yen reversing earlier losses in the Nikkei.

The Day Ahead:

It’s a particularly busy day ahead on the economic calendar, with a plethora of stats scheduled for release alongside central bank commentary through to the close.

Following a softer Dollar on Thursday, the markets will be looking for a continued recovery in the Dollar to close out the week in positive territory.

Stats out of the U.S this afternoon include August’s personal spending and the FED’s preferred Core PCE Price Index figures, together with September’s finalized consumer sentiment numbers and Chicago’s PMI. The stats are forecasted to be mixed, though personal spending and inflation numbers will likely have the greatest influence on the day. An uptick in inflation towards the FED’s 2% objective will certainly support the Dollar and the continued shift in market sentiment towards FED monetary policy.

While the data will be of influence, the markets will also be looking out for clues from ECB President Draghi and BoE Governor Carney on when to expect action from the respective central banks, investors still waiting on the ECB to outline its intentions vis-à-vis the asset purchasing program and whether there will be any tweaking to deposit and interest rates.

Ahead of Carney’s speech this afternoon, MPC members Cunliffe and Broadbent are also scheduled to speak, so we could have a pretty good idea on where MPC members sit ahead of the next MPC meeting.

Economic data out of the UK this morning includes 3 rd estimate, 2 nd quarter GDP and business investment figures, which are forecasted to be in line with 2 nd estimates, the UK economy continuing to demonstrate resilience despite the uncertainties over Brexit and the anticipated impact on the UK economy.

Across the Channel, stats out of the Eurozone include prelim September inflation figures, German retail sales and employment numbers and consumer spending figures out of France. Focus will be hinged on the inflation figures, which will certainly influence how aggressively the ECB will move before the end of the year.

With all the majors in focus through the day, it’s certainly going to be a significant end to the week, with the Dollar having already responded to both the FED Chair’s hawkish commentary and the U.S President’s promise of an imminent roll out of tax reforms.

At the time of writing, the Dollar Spot Index was up 0.11% at 93.192, with the EUR down 0.09% at $1.1775 and the Pound down 0.24% at $1.3410, with direction through to the close for the trio down to Carney and Draghi more so than the large number of stats scheduled for release through the day, as the markets also continue to assess Trump’s tax proposals and whether they will come into fruition.

This article was originally posted on FX Empire

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