Yen falls as Japanese machine tool orders collapse, euro stabilises despite German industrial production slipping
Fears over the strength of the Japanese economy and doubts regarding its ability to weather the storm caused by China’s economy slipping, reappeared during the Asian session, as the latest machine tool orders fell sharply, whilst missing the forecast by some distance. In the month of February (YoY), the orders figure fell by -29.3%, after a -18.8% fall up to January.
Yen slipped versus several of its peers, as analysts deduced that the BOJ is less likely to cut its ultra loose monetary policy programme, if Japan continues to exhibit signs that the economy has structural faults. At 8:15am U.K. time, USD/JPY traded up 0.11% at 111.25, EUR/JPY traded up 0.20% and GBP/JPY traded up 0.05%.
Germany’s economy is still displaying signs of weakness; the latest industrial production data for the Eurozone’s powerhouse, came in at -0.8% for January, remaining at -3.30% year on year. Good news was published for the country in the form of the latest import and export figures, beating the Reuters forecasts. Imports rose by 1.5% in the month of January, whilst exports registered a flat 0.00% reading. January’s German current account rose to €18.3b, whilst the trade surplus fell to €14.5b for the month.
Analysts and FX traders will be looking for improvement later this week as other key data is published for the German and wider Eurozone economy, such as; the latest wholesale prices and the CPI data. The euro rose versus the majority of its peers during the early part of the London-European trading session. At 8:30am EUR/USD traded up 0.05% at 1.125, EUR/GBP traded up 0.25% at 0.865, whilst EUR/CHF breached the first level of resistance, threatening to take out R2.
The U.K. Brexit news began early on Monday morning; no sooner had the London session opened, when news broke that the U.K. prime minister’s shuttle diplomacy mission to Brussels, scheduled for Monday afternoon, has been cancelled. The day before she brings the original withdrawal deal back to the U.K. parliament, for its second vote. After being voted down by a record amount in January, analysts remain puzzled as to why she’s continually wasting time. The only conclusion can be that she’s counting down the clock, blackmailing MPs to vote for her deal, or there’ll be a no deal, catastrophic, exit.
This week will witness intense lobbying and horse trading in the U.K. House of Commons, as several key Brexit votes take place. Sterling appeared to maintain position despite the breaking Brexit news, perhaps FX analysts have calculated Parliament will finally take control from the U.K. govt later this week. At 8:40am U.K. time, GBP/USD traded down -0.11% at 1.299, breaking back down through the 1.300 critical psyche handle and the 200 DMA, sited at 1.299. The U.K. FTSE traded at 7,157 at 8:40am, recovering from Friday March 8th’s sharp sell off.
Whilst Brexit news will dominate the U.K. economic narrative this week, FX traders need to also remain vigilant to the series of data published on Tuesday, including the latest monthly GDP figure, which is forecast to come in 0.2% for February and 0.20% for Q4 2018. Industrial, manufacturing and construction figures will also be revealed on Tuesday, which are expected to register slight improvements (month on month) in January.
Global growth contraction fears are still impacting on investors’ decision making, those doubts were heightened last week as the ECB reduced its growth forecast for the Eurozone, whilst committing to further investment bank funding and tempering any belief that the key interest rate for the E.Z. would be raised above zero in 2019. These contraction fears are extending to the USA economy, after the BLS statistics agency revealed last Friday that only 20,000 new jobs were created in February, coming after the USA GDP fell to 2.60% QoQ annually.
With China’s export performance imploding by -20.2% YoY, a light might be going on in the White House Oval Office, that if China sneezes, the USA catches pneumonia. Therefore, it’s in the interests of the USA to abandon their trade war and further tariff threats with China. If the Chinese economy is beginning to experience an organic contraction, after such stellar growth over the past decade, it’s in no one’s interest to accelerate that process. At 9:00am U.K. time USD/CNY traded up 0.06%.
Late evening on Monday, at 23:00pm U.K. time, the Fed chair Jerome Powell will appear on national USA television. The CBS 60 minute programme is widely viewed and respected, for interviews conducted at this level. Therefore, the interview is listed as a high impact calendar event, based on the information Mr. Powell might share, in relation to where he thinks the USA economy may be headed and what tools he can use, to achieve the Fed’s objectives.
« U.K. GDP growth data, combined with other high impact releases and the ongoing Brexit debacle, could cause sterling pairs to whipsaw during Tuesday’s London trading session U.K. pound rises on Brexit optimism, USA equity market indices surge as Trump slashes taxes in his budget statement »