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Japanese Demands Falter, Stoking Recessionary Fears

Friday, 17 October 2008 11:20:50 GMT  |  David Song, Currency Analyst

Fundamental Headlines

• GM and Chrysler Step Up Talks Over a Combination – Wall Street Journal
• Two Banks May Face Sanctions in Hong Kong Lehman Probe – Wall Street Journal
• Hedge funds in grip of vicious selling cycle – Financial Times
• Schlumberger Profit Rises After Oil Climbs to Record – Bloomberg
• Warren Buffett Says Now Is the Right Time to Buy U.S. Equities – Bloomberg

• EURUSD – The adjusted trade deficit for the Euro-Zone pulled back from a record high reading of -6.7B to -6.1B in August on the back of lower import demands. Despite the minor improvement, growth prospects for the 15 European nations remains dim as export demands are expected to slow further in the coming months as fears of a global recession intensifies. In fact, exports to the U.S. during the first seven months of the year slipped 4% from the previous year while demands from the U.K. only increased 1% during the same period. Meanwhile, building activity contracted 2.5% in August, highlighting the ongoing weakness in the economy. The data suggests that trade conditions may weaken further as economic activity throughout the global economy deteriorates, and may lead the ECB to ease policy further in order to stave off additional downturns in the economy. Discuss the topic and your trade ideas in the EUR/USD Forum.

• USDJPY - The tertiary index for Japan fell 1.4% after rising 1.2% in July, indicating that consumers are lowering demands for services as they continue to face higher living costs amid fading employment demands. In addition, nationwide department store sales fell another 4.7% following last months 3.1% decline, while sales in Tokyo dropped 4.6% following the 4.1% decline in the previous month. The data suggests that economic activity will weaken further as domestic demands waver, and has raised speculation that the world’s second largest economy may fall into a recession by the end of the year. For more news and resources, visit the new Japanese Yen Currency Room.

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