Asia saw weakness in the JPY crosses after Japanese Industrial Production came in at +4.3% year over year better than expectations of +3.7%. Traders were buying the JPY in anticipation of an increase in interest rates by the Bank of Japan despite still weak consumer inflation. However, London did not follow Asia�s lead and bought USD/JPY back to the 115.50 area where it had originally sold off from in Asia. EUR/JPY held below 163 and also rallied back to levels before the release of the Japanese data.
Cable had found only sellers above 2.0200 earlier this week but broke through that level in yesterday�s London session. In classic fashion, resistance became support as it found only buyers below 2.0200 and rallied sharply back along with the resurgence in the JPY carry trade. EUR/USD was also strong as it trades just below all-time highs. In contrast, AUD/USD and NZD/USD, both of which have been strong, found sellers today.
Looking forward, we have US income and spending data in NY which could give clues on how the consumer is adapting to the adjustment in the housing and credit markets. Given that consumer expenditures accounts for the major of Gross Domestic Production, markets will be keenly focused on this data. Also, next week kicks off with the Japanese Tankan Report, a key release that could heavily influence the future direction of Japanese interest rates.
Upcoming Data Releases (New York Session):
US: (8:30am ET) August Personal Income expected .4% vs. previous .5% (relevance: high). August Personal Spending expected .4% vs. previous .4% (relevance: high). (9:45am ET) Chicago Purchasing Manager Index expected 53.1 vs. previous 53.8 (relevance: medium). (10am ET) University of Michigan Confidence expected 84 vs. previous 83.8 (relevance: low).
Canada: (8:30am ET) Month over month Gross Domestic Product expected .4% vs. previous .2% (relevance: high). Month over month Industrial Production expected -.5% vs. previous -.7% (relevance: high).