(31 AUGUST 2018)DAILY MARKET BRIEF 2:Strong yen, weak economy

(31 AUGUST 2018)DAILY MARKET BRIEF 2:Strong yen, weak economy

31 August 2018, 14:33
Jiming Huang
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Japan’s economic data this week remain subdued, with a continued slowdown in industrial production in July, consumer consumption flat and a slight acceleration in inflation for August (CPI annual figures at 1.20%, slightly above consensus at 1%; core at 0.90%), suggesting a weak bounce for Q3 GDP. Accordingly, the Bank of Japan is expected to scale down its inflation target of 2% while maintaining its key rate stable at -0.10% at its next policy meeting on 18 September. Currently trading at 110.70, USD/JPY is expected to decline further, approaching strong support at 110.07 (20 July low).

Mounting risk-off sentiment is prompting investors to stop taking new positions and take refuge in safe havens. Key political events are the IMF’s Argentina rescue, NAFTA talks along with Trump’s rejection of zero duties on cars put forward by the EU and Trump’s intent to impose an additional $200 billion tariffs in Chinese imports by next week. As uncertainty predominates, equities remain in the red, with the Hong Kong Hang Seng given at -1.15%, Euro Stoxx 50 at -0.52%, SMI at -0.45% and Nikkei 225 at -0.02%.

By Vincent Mivelaz

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