USD/JPY Fundamental Daily Forecast – Bearish GDP Report Could Add to “Risk-Off” Tone

The Dollar/Yen is trading lower on Thursday in reaction to geopolitical tensions. Earlier today, the Trump-Kim summit was cut short after North Korea demanded the end of sanctions, according to President Trump. On Wednesday, uncertainty over U.S.-China trade relations drove investors into the safety of the Japanese Yen. Traders are also concerned over the escalating military tensions between India and Pakistan.

At 09:03 GMT, the USD/JPY is trading 110.818, down 0.176 or -0.16%.

Global equity markets are trading sharply lower and U.S. Treasury yields are trending lower, which is a strong indication that today is going to be a “risk-off” trading session. These moves are helping to drive up demand in the safe-haven Japanese Yen.

U.S.-North Korean Summit

On Thursday, the talks between the United States and North Korea ended abruptly when President Trump and North Korean leader Kim Jong Un were unable to reach a deal at the end of two days of meetings in Hanoi. Talks appeared to be moving smoothly, but the two leaders were unable to reach an agreement after the U.S. refused North Korean demands for sanctions relief.

“They wanted the sanctions lifted in their entirety and we couldn’t do that,” Trump said at a news conference.

Worries Over U.S.-China Trade Relations

Safe-haven buying was evident on Wednesday amid uncertainty over the progress in U.S.-China trade talks. Money moved into the safe-haven Japanese Yen after U.S. Trade Representative Robert Lighthizer told a Congressional hearing it was too early to predict an outcome in U.S.-China trade negotiations.

Pakistan and India Tensions Flare-up

Dollar/Yen traders are also watching the flare-up of tensions between Pakistan and India. This is driving some investors to seek shelter in the safety of the Japanese Yen. Problems started earlier in the week after both sides carried out airstrikes against each other.

Daily Forecast

The USD/JPY is likely to remain under pressure on Thursday as long as investors continue to shed risky investments.

The key report today will be U.S. Advance GDP. After a month-long delay due to the federal government shutdown, data out Thursday will show just how much steam the U.S. economy lost in the fourth quarter, and what it is likely to mean for 2019.

Gross domestic product expanded at a 2.3 percent annualized pace in the fourth quarter following the best back-to-back gains since 2014, according to the median estimate of economists surveyed by Bloomberg ahead of the Commerce Department report.