Japan Trade Woes Continue as Focus Shifts to the USD and the FED

Earlier in the Day:

Economic data released through the Asian session this morning included 4^th quarter producer input price figures out of New Zealand, January trade data out of Japan and 4^th quarter wage growth numbers out of Australia.

For the Kiwi Dollar,

According to figures released by NZ Stats, Producer input prices rose by 1.6% in the 4^th quarter of last year, with inputs rising from the previous quarter’s 1.4%.

• The rise in input prices was attributed to a jump in electricity prices in the quarter. Fewer resources had been available through the quarter to generate electricity, leading to the sharpest increase in electricity prices since 2008.
• Prices paid by electricity and gas supply producers rose by 23% in the 4^th Commercial electricity prices for business increased by 8.2% in the quarter.
• Electricity prices for dairy farms increased by 6.1% over the quarter, with prices for all farms rising by 5.1%.
• In spite of the jump in electricity prices, the increased cost was not passed onto households, resulting in a 0.2% fall in consumer prices in the 4^th
• Output prices saw a more modest increase of just 0.8%, muting the effect of the jump in input prices on the Kiwi Dollar.

The Kiwi Dollar moved from $0.68821 to $0.68827 upon release of the figures. At the time of writing, the Kiwi Dollar stood at $0.6872, down by 0.16% for the morning.

For the Japanese Yen,

The trade deficit widened from ¥57bn to ¥1,415bn in January, according to figures released by the Ministry of Finance.

• Exports slumped by 8.4% year-on-year, which was worse than a forecasted 5.5% fall. Exports had fallen by 3.9% in December, compared with the year prior.
  • Exports to China tumbled by 17.4% and by 21.2% to Hong Kong.
  • By contrast, exports to the U.S rose by 6.8%, which may well put Japan back under the scrutiny of the U.S administration.
• Imports fell by just 0.6%, which was better than a forecasted 2.8% decline. In December, imports had risen by 1.9%.

The Japanese Yen moved from ¥110.636 to ¥110.623 against the Dollar upon release of the figures, with exports seeing the largest year-on-year fall since late 2016. At the time of writing, the Japanese Yen stood at ¥110.78, down 0.14% for the session.

For the Aussie Dollar,

In the 4^th quarter, wages rose by 0.5%, quarter-on-quarter, which was weaker than a forecasted and 3^rd quarter 0.6% increase.

According to the figures released by the ABS,

• Over the year, wages grew by 2.3%. Public sector wages continued to outpace private sector wages, growing by 2.5%. Private sector wages rose by 2.3%.
• While public sector wages outpaced public sector wage growth for the 4^th year, the pace of private sector wage growth was the highest since the final quarter of 2014.

The Aussie Dollar moved from $0.71679 to $0.71571 upon release of the minutes. At the time of writing, the Aussie Dollar stood at $0.7164, down by 0.01% for the session.

The Day Ahead:

For the EUR

Economic data scheduled for release this morning includes January wholesale inflation numbers out of Germany. Later in the day, February prelim consumer confidence figures for the Eurozone are also scheduled for release.

Barring a surprise pickup in inflationary pressures, we would expect the focus to be on the consumer confidence numbers due out late into the European session.

On the monetary policy front, the ECB’s Praet is scheduled to speak ahead of the European open this morning.

Away from the economic calendar, market risk sentiment will continue to influence. Progress on trade talks will be the positive, whilst concerns over the outlook for growth are expected to be negative for the EUR.

At the time of writing, the EUR up by 0.04% at $1.1345.

For the Pound

Economic data is limited to February’s CBI Industrial Trend Orders. While we will expect the Pound to respond to the number, the Pound will continue to remain in the hands of Brexit chatter as both the Tories and the opposition party face the prospects of party members walking out the door.

The British PM is back to Brussels today in a bid to resolve the backstop issue. We can expect the Pound to be particularly sensitive to any chatter through the day.

At the time of writing, the Pound was down by 0.02% at $1.3060.

Across the Pond

It’s another quiet day on the economic calendar, with no material stats scheduled for release. While there are no stats scheduled for release, the FOMC meeting minutes will garner plenty of attention and could pin back the Dollar further.

Following Monday’s holiday, trade resumed and the markets will likely receive further updates in the coming days. With few expecting a resolution to the trade war this week, an extension to the 1^st March deadline will need to be a minimum to support market risk sentiment.

At the time of writing, the Dollar Spot Index was down by 0.01% to 96.513.

For the Loonie

It’s another day free of economic data out of Canada, leaving the Loonie in the hands of risk sentiment and direction of crude oil prices.

While the Loonie will respond to the weekly EIA crude oil inventory numbers, updates on trade talks will likely remain the key driver near-term.

The Loonie was up by 0.11% to C$1.3196, against the U.S Dollar, at the time of writing.