Talking Points:
- Japanese growth data saw a sharp lower revision
- The markets had been prepared for a cut to growth but this was a big one
- The Yen sailed serenely on, however, with USD/JPY rising in the aftermath
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The Japanese Yen was steady Friday following a mixed set of key data from its homeland.
The big shock came in a sharp final revision to second quarter Gross Domestic Product numbers. Initially estimated at 4% annualized, the Japanese statistics agency now claims that growth was a mere 2.5%. The markets had been looking for a fairly sharp downward adjustment, to 2.9%. In the event they were too optimistic. Still, Japanese growth still looks acceptable by developed market standards.
Moreover, with Japanese monetary policy apparently set in stone until inflation rises sustainably, the link between economic data and the Yen is often weak, which may explain the lack of reaction to these numbers. And there wasn’t much sign of inflation in the GDP data. Its measure, the so-called deflator, stood at -0.4%, as expected.
The data weren’t all bad, by any means. July’s trade balance came in at JPY566.7 billion (US$5.2 billion), which was a little better than the JPY518 billion expected.
USD/JPY continued to meander lower after the figures. The greenback has been under some pressure against the Euro in the last few hours despite European Central Bank President Mario Draghi’s disinclination to signal any monetary tightening on Thursday.
On a broader, daily chart, it’s clear that USD/JPY has made a second lower high in recent sessions and has now re-entered the danger zone (for bulls) which protects the year’s lows. This has seen quite doughty defense in the past but, with a downtrend clearly in place, a break would seem to be merely a matter of time.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
