Japan Exports Impress, While the Dollar Continues to Disappoint

Asian equities are on the rise again this morning, while the Dollar stumble resumes on a light trading day, with China, HK, the U.S and Canada on holiday today.
Bob Mason
U.S. Dollar Index

Earlier in the Day:

Economic data through the Asian session this morning was limited to Japan’s January trade figures.

Exports rose for the 14th month in a row by 12.2% to ¥6,086bn, which was better than a forecasted 10.3% and December 9.3% rise, whilst January’s trade balance reversed from a ¥359bn surplus to a ¥943bn deficit.

January’s trade deficit was the first deficit since May of last year, as rising fuel costs lead to imports increasing by 7.9% to ¥7,029bn.

From an economy perspective, the upbeat import figures are a positive for Prime Minister Abe who is looking for increased domestic consumption, while the stronger Yen may weigh on inflationary pressures.

While exports to the U.S were on the rise, the trade surplus with the U.S narrowed, with exports to China rising by a whopping 31% year-on-year.

The yen moved from ¥106.145 to ¥106.311 against the Dollar upon release of the figures, with the markets taking the export figure as yet another positive indicator for the global economy, before easing further to ¥106.33 at the time of writing, down 0.11% for the morning.

Elsewhere, the Aussie Dollar was up 0.27% to $0.7926, with the Kiwi Dollar up 0.14% to $0.7396, the pair getting support of Friday’s fall in U.S Treasury yields.

In the equity markets, the lack of material economic data and lighter trading volumes did little to dampen risk appetite, with the Nikkei up 1.62% and the ASX200 up 0.73% at the time of writing, supported by gains in the Dow, S&P500 and NASDAQ minis this morning. Both the China and Hong Kong markets were closed for Chinese New Year, with the HK market opening tomorrow and China open for business on Thursday.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through today’s session, while stats for the week are on the heavier side, with prelim February private sector PMI, German consumer, business confidence and 2nd estimate GDP figures there for the markets to consider along with the ECB’s monetary policy meeting minutes.

Interestingly, the markets have shown little regard to the political stand-off in Germany, with SDP members voting tomorrow on whether the party should proceed with the grand coalition. While the general view is that the vote will be in favour of the coalition, SDP support continues to fall, which could lead to a surprise vote, the results scheduled for release on 4th March.

At the time of writing, the EUR was up 0.14% to $1.2423, with a softer Dollar contributing to the EUR’s early gains.

Across the Channel, with no material stats out of the UK, focus will be on tonight’s scheduled BoE Governor Carney speech that comes ahead of tomorrow’s inflation report hearings. Carney has been particularly hawkish of late and there may be more to come tonight and tomorrow that could fuel another Pound rally.

On the Brexit front, EU negotiator Verhofstadt has said that there would be no trade agreement before Britain’s departure from the EU, with negotiations only to start once Britain enters its transition period.

The pound was up 0.10% to $1.404 at the time of writing, with the markets showing little response to the negative Brexit chatter ahead of a resumption of talks next month.

Across the Pond, volumes will be on the lighter side with the U.S on holiday in commemoration of President George Washington’s Birthday, which will likely leave the Dollar on the back foot through the day, with the Canadian markets closed for Family Day.

At the time of writing, the Dollar Spot Index was down 0.06% to 89.045, while the Loonie was up 0.17% to C$1.2537 against the U.S Dollar, as crude oil prices continue to move ahead, in spite of concerns over U.S supply.

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