USD/JPY Slides despite Japanese Retail Sales Slump

Modified: Thursday, 30 March 2017 16:36 BST - Written by Toni Johnson

STORY LINK USD/JPY Slides despite Japanese Retail Sales Slump

The US Dollar to Japanese Yen exchange rate trended flatly on Thursday afternoon, just below the week’s opening levels after fluctuating earlier in the day.

The latest US data gave the ‘Greenback’ some additional support but this was not enough to give USD/JPY a notable boost. The final Q4 US Gross Domestic Product (GDP) report beat quarterly expectations and came in at 2.1%.

[Previously updated 30/03/2017]

Although some Fed policymakers have adopted a more hawkish tone on monetary policy demand for the US Dollar has failed to particularly pick up.

As investors remain cautious over the prospect of promised tax cuts and infrastructure spending making it through Congress the ‘Greenback’ has struggled to regain ground against the favoured safe-haven Yen.

[Previously updated 29/03/2017]

The US Dollar to Japanese Yen exchange rate is currently declining -0.3% despite mixed data from Japan.

USD in Limbo as Markets Question Trump Stimulus

The initial rout in the US Dollar seen after President Donald Trump’s healthcare bill embarrassment has since abated, although USD is struggling to find a direction even as investors become more confident again in Trump’s ability to gain approval for his stimulus measures.

If Trump’s plans for tax reform and increased fiscal spending do fall flat, the outlook on Federal Reserve monetary policy could weaken too, leaving investors uncertain on the viability of the US Dollar’s two strongest upside risks.

A huge surge in consumer confidence yesterday helped to support USD demand somewhat, with the index rising from 116.1 to 125.6.

Investors Still Favour Safe Haven JPY over USD despite Poor Retail Data

The latest Japanese retail data has disappointed, although a positive business confidence score and its reputation as a safe-haven asset have kept JPY/USD on the uptrend.

February saw retail trade slow from 1% to 0.1% year-on-year when a slowdown to 0.7% had been predicted.

Seasonally adjusted retail trade was revised lower to 0.2% for January and remained at that level in February, while the decline in large retailers’ sales accelerated beyond forecasts to -2.7% from -1.1%, rather than to -1.8%.

This morning’s early data has proved more positive, however, with the small business confidence index for March climbing from 47.7 to 50.5.

USD/JPY Exchange Rate Forecast; Fed Speeches to Provide More Direction on Monetary Policy?

With markets waiting for more news of Donald Trump’s stimulus plans, focus has returned to the Federal Reserve.

Although the Fed hiked rates during this month’s policy meeting, it seems that policymakers are less convinced about the needs for further normalisation than markets had expected.

James Bullard commented recently that, while he would be ‘okay’ with another hike, he thought the March hike was sufficient to get monetary policy back on track.

A recent public address by Janet Yellen also suggested no changes to the forward curve for monetary policy; investors had hoped that the early March hike would mean the Fed was planning to fit four hikes into 2017 in total.

With the outlook on interest rates somewhat dampening, investors will look to speeches today from the Fed’s Eric Rosengren and John Williams for additional clues.

Japanese data due for release today covers only foreign bond buying and is unlikely to be particularly influential.

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TAGS: American Dollar Forecasts