JAPAN GROWTH STORY CONTINUES AS US INFLATION WORRIES MOUNT

The Japanese yen rose more than a percentage point against the dollar after the country released its QoQ GDP numbers. While the released growth number – of 0.5% - missed analysts' forecast of 0.9%, investors were pleased by the country’s rate of recovery. It showed a country which has been expanding its GDP for more than 18 months. This number places BoJ at a difficult place where they have to make a decision on whether to keep supporting the economy through negative interest rates and asset purchases.

In the United States, the inflation rate rose more than expected. The core inflation, which excludes foods, rose by 1.8%, which was higher than the analysts' estimates of 1.7%.  The headline index came at an annualized rate of 2.1%, which was unchanged from the December reading but higher than analysts estimates. The dollar index rose by almost 47 basis points as concerns of higher rates continued.  In addition, retail data disappointed, with the core retail sales stagnating. Analysts expected it to grow by 0.5%.

In Germany, the inflation rate remained unchanged at 1.6%. The annualized GDP and quarterly GDP growth remained unchanged at 1.6% and 0.6% respectively.

EUR/USD

The EUR/USD pair ended the upward trend it had developed following the reading of US inflation. The pair fell to a low of 1.2274. This was the lowest level since 23 January. With inflation rate holding on, at a time when the Fed is gradually raising rates, there are chances that the dollar could continue moving up against the Euro.

USD/JPY

The Japanese Yen rose against the dollar in early trading as the country’s economy continued its growth. After the US data was released, the pair tried to recover some of the losses. The pair seems to be forming a symmetrical triangle pattern. Traders should now watch whether the pair will cross the 107.54 level which forms an important resistance.

EUR/GBP

The EUR/GBP pair fell as Germany’s GDP data showed resilience. The Euro area data released later also showed the economy remained strong. The annualized GDP for the area came at 2.7% while last quarter’s figures remained steady at 0.6%. The pair is currently trading above the short-term moving averages, while the Commodities Channel Index (CCI) is above the overbought level of 100. In the short term, unless of a major change, the pair could continue trading within its current range.