USDJPY Dips As Philadelphia Fed Shrinks More Than Forecast in August
THE TAKEAWAY: [US Philadelphia Fed index contracts for a fourth month] > [Global economic slowdown and weak labor market conditions weigh on business activity] > [USDJPY bearish]
Manufacturing in the Philadelphia region contracted for a fourth month, indicating that the slowdown in global economies and weaker labor market conditions are continuing to hold factories back. The Federal Reserve Bank of Philadelphia’s general economic index came in at -7.1 in August, after registering -12.9 the previous month. Economists surveyed by Bloomberg News had forecast an improved figure of -5.0. A reading below zero signals below-trend factory growth.
The Philadelphia Fed’s Business Outlook Survey is released monthly, and covers business confidence of manufacturers in eastern Pennsylvania, southern New Jersey and Delaware. The forward-looking index is viewed as one of the first monthly indicators leading up to the ISM Manufacturing report.
Business activity remains subdued as global economic weakness, particularly in Europe and China, hampers demand for U.S. goods. Furthermore, persistent high unemployment levels and subdued wage growth continues to weigh on household spending. The Survey revealed that the employment sub-index fell to -8.6 in August from -8.4 the prior month.
USDJPY 1-minute Chart: August 16, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The U.S. dollar slipped against the Japanese yen in the minutes following the release of the Philadelphia Fed survey. The lackluster data does not bode well for future consumption trends, and may add to support for additional monetary measures by the Federal Reserve, which is maintaining a “wait-and-see” approach for the time being. At the time this report was written, the USDJPY pair was trading at 79.13 yen, below pre-data levels.
--- Written by Tzu-Wen Chen, DailyFX Research