[B]Overview[/B]
Japan’s economic growth in the fourth quarter pushed 1.1% higher from a revised 0% the quarter prior amid expectations of 0.9%. At the same time, the preliminary annualized rate climbed 4.6%, with expectations of 3.5%, while the region’s GDP deflator, the broadest measure of prices in the economy lost a record 3.0% from a year ago, and the better-than-expected growth rate reduces the risk of a double-dip recession, despite intensifying deflation.
[B]Breakdown
[/B]The breakdown of the report illustrated that exports, goods & services lead the rally, climbing 5.0%, while residential investment plunged 3.4% to taper the decline. The advance in exports continues its positive momentum as the global recovery aids manufactures in the region to raise profit forecasts this month. It is noteworthy that consumer spending is likely to scale back as stimulus measures by the government is expected to lighten.
[B]Market Reaction [/B]
There was little reaction to the data following the better-than-expected release, but looking at the daily chart, the pair continues to trade within a descending channel. Further losses maybe likely as the pair looks to bounce back from the upper trend channel, while the speculative strength index signals for further USDJPY losses. On the other hand, a rally above 91.00 is needed for the pair to turn bullish.
[B]Forecast[/B]
Looking ahead, investors are weighing a zero percent chance that the Bank of Japan will raise borrowing costs at its rate decision meeting on February 17th, according to the Credit Suisse overnight interest rate swaps as the central bank aims to encourage a sustainable recovery by leaving the target rate at 0.10%.
[I][B]Written by Michael Wright, Daily Fx Research
Questions? Comments? email me at <[email protected]>[/B][/I]