Intraday Market Thoughts

Onto Japan CPI, Jobs & NZ Figures

by Adam Button
Aug 28, 2014 23:47

More US economic data points beat expectations on Thursday but the dollar was sluggish, we look at why. On the day the Australian dollar was the best performer while the euro lagged. Later, yen risks are heightened with a major slate of Japanese data is due.  

The parade of better US economic data continued with GDP but after an initial spike the dollar sagged. First let's look at the data.

GDP rose at a 4.2% annualized pace in the second reading on GDP. The initial reading was 4.0% and the consensus was 3.9%. The caveat to the report was that the market was expecting a higher reading after upward revisions in Tuesday's durable goods orders report.

Still, there was plenty of good news in the GDP data. It showed PCE inflation up 2.2% compared 2.0% expected and capex was revised to 8.4% from 5.5% initially.

Other numbers were also upbeat as pending home sales also rose 3.3% m/m compared to 0.5% expected and the initial jobless claims report was slightly better.

Surely the numbers make it marginally more likely that the Fed hikes rates sooner but here's why the dollar didn't climb. First, it's clear that the positive effects of good news on the US dollar are fading. That says that the 7-week run in USD is a bit tired. Second, the market is no longer satisfied with only good news, it wants a signal from the Fed. Third, we're at the end of the month and the market is thin ahead of a long weekend so profitable dollar longs are being pared.

Looking ahead, the yen is in focus with a major slate of data due. At 2330 GMT, the jobs and CPI reports are due. The CPI ex-food and energy is expected up 2.3% y/y. Twenty minutes later, retail sales for July are expected down 0.2%.

Since Kuroda said the job is only half done, there's a wave of renewed excitement about yen weakness. Poor numbers or low inflation could start to boost USD/JPY. 

Our 3 NZD Premium trades await tonight's NZ data on building permits and consumer confidence. The Japan data will impact our EURJPY trades
Act Exp Prev GMT
National CPI Ex Food, Energy (JUL) (y/y)
2.3% Aug 28 23:30
National CPI Ex-Fresh Food (JUL) (y/y)
3.3% 3.3% Aug 28 23:30
Tokyo CPI (JUL) (y/y)
2.8% Aug 28 23:30
Tokyo CPI ex Food, Energy (JUL) (y/y)
2.1% Aug 28 23:30
Tokyo CPI ex Fresh Food (JUL) (y/y)
2.8% Aug 28 23:30
Eurozone Spanish Flash CPI (y/y)
-0.5% -0.2% -0.3% Aug 28 7:00
Eurozone CPI (AUG) (y/y) [P]
0.3% 0.4% Aug 29 9:00
Eurozone CPI - Core (AUG) (y/y) [P]
0.8% 0.8% Aug 29 9:00
Building Consents (JUL) (m/m)
0.1% 3.5% Aug 28 22:45
GDP Price Index (q/q) [P]
2.2% 2.0% 2.0% Aug 28 12:30
Pending Home Sales Index
105.9 102.5 Aug 28 14:00
Eurozone Consumer Confidence
-10.0 -10.0 -8.4 Aug 28 9:00
Continuing Jobless Claims
2,527K 2,513K 2,502K Aug 28 12:30
Initial Jobless Claims
298K 300K 299K Aug 28 12:30
Jobless Claims 4-Week Avg.
299.75K 301.00K Aug 28 12:30

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