GDP Boosts Dollar, Japan CPI Next

Upbeat US GDP numbers boosted the argument for a September taper. The US dollar was the best performer while the Swiss franc lagged. In Japan later, a wave of top-tier data hits including employment and inflation numbers.  

The second reading on US GDP showed 2.5% annualized growth in the second quarter, much stronger than the 1.7% originally reported. The US dollar rallied to the highs of the day after the data. USD/JPY climbed to 98.52, near the long-term downtrend at 98.99.

Some caveats in the data stifled the optimism. Inventory accumulation was responsible for 0.6 percentage points of growth and that will likely take away from Q3 GDP. Corporate profits were also a large boost but companies are using the money to pay larger dividends rather than investing, a choice that's less beneficial for the economy.

The euro was especially weak Thursday on weak German GDP and employment. At one point, the euro decline was the largest since May. After falling to 1.3218, the euro bounced to 1.3238 but was still down nearly a full cent on the day.

Fears surrounding Syrian action continue to fade as the White House highlights a course of action that includes only limited airstrikes. After touching $110, US crude oil fell below $108.

The focus now turns to Japan and its battle against deflation. At 2330 GMT, July national numbers are expected to show prices up 0.7% y/y but down 0.2% excluding food and energy. Lower readings could spark talk about further BOJ stimulus or a rollback in planned tax hikes.

Along with the CPI numbers, Japan will also release employment data but the solid jobs picture in Japan rarely moves FX. Twenty minutes later, July industrial production is expected to rise 3.6% after a 3.1% in June.