Japanese Data Weighs on Risk Sentiment after BOJ Speech, German GDP Data Forecast to Alter Euro (EUR) Levels in Near-Term

May 23, 2016 - Written by Toni Johnson

STORY LINK Japanese Data Weighs on Risk Sentiment after BOJ Speech, German GDP Data Forecast to Alter Euro (EUR) Levels in Near-Term

The Yen has recently been a poor prospect, on account of recent support for the nation's controversial low interest rates from a Bank of Japan (BOJ) official.

The Pound has dropped off in exchange rate pairings recently, likely owing to increasingly dramatic debates taking place over what might happen if the UK remains in or leaves the EU.

Disappointing Japanese Data Weighed on Trader Risk-Appetite, Yen Declines

Grim data from Japan has set the tone for early trading this week. Although the Yen-denominated Trade Balance figure for April eclipsed analysts’ expectations of a JPY521.4 bn showing, the component import and export numbers raised alarm bells for global investors.

The import figure for last month was particularly concerning, pointing to a mammoth drop of 23.3% from the counterpart figure for April 2015. The export reading of -10.1% also stoked fears of a widespread economic slowdown in the Asia Pacific region.

The shocking reduction in the level of shipments into the second largest economy in Asia during the past twelve months may, at least in part, be attributable to the pronounced strengthening of the Japanese Yen (currency : JPY) during this period – a development which has caused the prices of foreign imports into Japan to plunge, thus reducing their Yen value.

Equally, the improvement for the Yen over the past year has made Japan’s exports to foreign markets relatively more expensive and reduced demand for them. For these reasons, the Bank of Japan is desperate for a weaker Yen – whether it will get its wish is another matter altogether.

The poor overnight data from Tokyo has weighed on global stock markets and by the latter stages of the European equities session, London’s benchmark FTSE 100 index had shed 0.35% of its value. Meanwhile, Frankfurt’s Dax had given up 0.63% and Paris’ Cac 40 had dropped by 0.82%. However, the broad-ranging S&P 500 index in Chicago bucked the trend, opening up higher by just over half a per cent a short time ago.

German Q1 GDP to Provoke Euro (EUR) Exchange Rate Volatility

Looking ahead, the finalised version of Germany’s Q1 Gross Domestic Product data is penned in for publication early tomorrow morning.

The figure is expected to confirm earlier estimates of a year-on-year 1.6% level of growth – any higher than this and the Sterling euro exchange rate is forecast to give up a portion of its gains of the past week.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Euro Forecasts Japanese Yen Forecasts