Solid Trade Data Boosts Japanese Yen

The USD/JPY lost ground on Monday after almost three weeks of strong gains. Traders were reacting to the solid trade data from Japan and the end of the Group of Seven finance ministers’ meeting that concluded on Saturday. The highlight of the meeting was the U.S. warning Japan against intervening to weaken the Yen.

Data on Monday showed Japan’s trade balance in April was 823.5 billion yen ($7.50 billion), against economists’ forecasts for a 429.8 billion yen increase. Japan logged a trade surplus for the third consecutive month.

Traders are expected to toss around the idea of possible June or July interest rate hike by the Fed. This idea is likely to be supported by a handful of Fed members this week, but could be dismissed if U.S. durable goods or preliminary GDP come out weaker than expected.

The GBP/USD was mixed after last week’s volatile trade. Investors are trading the headlines so we could see more volatility with the release of new polls over whether Brits plan to stay or leave the European Union. Polls in favor of an exit are likely to put pressure on the British Pound. Data showing more Brits prefer to stay in the EU is likely to be supportive.

Commodity-linked currencies lost ground on Monday due to the firmer U.S. Dollar. The AUD/USD lost 0.50%. The NZD/USD came in at .6765, down 0.0036 or -0.52%. Both Forex pairs were also be pressured by traders who believe their respective central banks are planning rate cuts in the near futures. The USD/CAD rose 0.0034, or +0.26% to 1.3138. The sell-off by the Canadian Dollar was related to lower crude oil prices.

Crude oil futures were driven lower after Iran said it would not freeze crude output, forcing investors to take a good look at the global supply glut. Adding to the developing weakness was the news that the number of rigs operated by U.S. drillers held steady for the first time this year, following a near two-year slump in the rig count.

June Comex Gold futures dipped to a near a three-month low on the lack of demand due to expectations of a Fed rate hike in June or July. Sellers were encouraged by comments from Federal Reserve Bank of Boston President Eric Rosengren, who said that conditions for a rate increase are “on the verge of broadly being met.”