JPY Retail continues to languish
EUR ITL Business confidence slips
GBP CBI Retail surges
CAD Manufacturing survey on tap
The data from Japan indicated that consumer demand continues to languish as Retail Trade dropped -0.3% versus -0.6% eyed while Large Retailers Sales plunged -3.4% versus -1.9% forecast. As a result USD/JPY set another four year high breaking above the 122.00 in late Asian trade before slightly retreating in early European session. Japanese, politicians continue to run interference against BoJs monetary policy with latest salvo coming from Hidenao Nakagawa , the Secretary general of the Liberal Democratic Party who noted that, I want the bank to make a judgment as part of an economic policy recognition shared with the government.
One of the interesting dynamics in the USDJPY trade these days is that yen bears have assumed that their positions face no danger from the upcoming G-7 meeting on February 9th. Indeed, the pre meeting rhetoric from the Euro-zone officials has been rather muted and accommodative suggesting that they will not press the Japanese on the issue of exchange rates. However, if yen continues to weaken ahead of the event, such tranquility may be misplaced. We believe that both the Europeans and the Americans will begin expressing some grave concern if USDJPY approaches anywhere near the 125.00 level. For now the yen bears have the listless Japanese data on their side, but with COT positioning showing record number of yen shorts and the pair approaching politically dangerous levels of exchange, the prospect of sharp correction in the carry trade remains high.
Meanwhile the news in UK was decidedly more upbeat as CBI Distributive Trades survey handily beat expectations hitting 22 versus 6 forecast as the UK consumer sector continues to demonstrates strength and vibrancy. The pound showed little reaction to the news as the market remains focused on the fact that BoE will not hike rates in February. However, should the UK data proceed at this pace for near term, the speculation of a rate hike in March is likely to gather force and the pair could stage a second attack on the 2.0000 barrier if currency traders begin to price in such expectations.