USD/JPY Consolidates ahead of Busy Week

Posted On 15 Dec 2014
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The USD/JPY is consolidating just below 119, coming off last week’s highs as investor sentiment declined as equity bourses slid. Growth in the U.S. continues to be very impressive with Retail Sales coming in much stronger than expected on the heels of a robust payroll report which also surprised market participants.

The Asian economic calendar is relatively light this week. The most significant event should from Japan with the December Bank of Japan meeting. The December Tankan report and November trade data will also highlight. China’s docket is nearly empty but for flash PMI. Of course the plunge in oil prices and their wide-ranging effects will keep the markets volatile. The FOMC meeting will garner a lot of attention , especially following last week’s drop in oil, which raised the issue of whether the Fed may remain dovish in the face of increased deflationary pressures.

In Japan, the Bank of Japan meets on Thursday and Friday, but economists do not expect any action from the Central Bank. Reduced oil costs will clearly weigh on CPI, although those cheaper costs should also boost the economy.

The data calendar kicks off with the December Tankan report. Expectations are for a drop to a 10 reading from the prior 13 for large manufacturers, and a 10 outcome from the previous 13 for large non-manufacturers. The data have been generally on a softening trend since the spring. The November trade deficit scheduled for Wednesday is seen widening to 900 billion yen from the 710 billion yen shortfall in October. Also, the October all-industry index scheduled for Friday is forecast sliding 0.1% month over month from 1.0%. Revised October leading and coincident indices are also due Friday. The preliminary leading index dropped 1.6%, while the coincident index edged up 0.4%.

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