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Forex Flash: US dollar firm ahead of key payrolls data - BTMU

Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that USD/JPY broke higher yesterday and is currently trading at levels not seen since August 2009.

He sees that the driver at this stage of the week may well be expectations of a supportive US employment report later today. He adds that data from Japan overnight confirmed weak real GDP growth at the end of last year and a deterioration in Japan´s current account position, although the deficit was smaller than expected.

Looking at the overnight data, Halpenny writes, “Real GDP was revised modestly higher from an annualised fall of 0.4% to an increase of 0.2% - the main factor behind the upward revision was the upward revision to capital spending, which fell 1.5% q/q versus a previous estimate of a 2.6% fall. The modest real GDP rise was the first since Q1 after declines of 3.7% and 0.9% in Q2 and Q3. Yen depreciation, fiscal stimulus and an improvement in external demand conditions should mean that a much more notable increase in real GDP takes place in Q1. Net exports shaved 0.2ppt of real GDP growth, the third consecutive quarter of subtraction.”

He feels that the belief that net exports may help real GDP going forward is in part due to the evidence of some improvement in the current account data released today, which mirrored the trade data already released showing an improvement in exports. On a non-seasonally adjusted basis, the current account deficit totaled JPY 364.8bn a smaller deficit than a year ago with exports up 6.7% on an annual basis. However, he adds that imports also jumped by 6.6% which left good and services deficit at JPY 1,659.5bn, larger than in January 2012.

He finishes by writing, “The investment income surplus continued to play the key role in offsetting Japan’s large trade and services deficit. Finally, given how closely we are watching for signs of improved household risk appetite, the jump in the Economy Watchers’ Survey is worth mentioning. The Outlook component jumped to a 57.7, a record since the series began in 2000.” In turn, Consumers certainly feel better, boding well for improved risk appetite at some point and as he has stated regularly, there’s not much evidence of that yet. He writes, “The break of 95.00 is obviously bullish and barring a disastrous payrolls report USD/JPY has scope to drift further higher.”

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Forex Flash: The Euro´s new regime - Nomura

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