Yen Unmoved as Machine Orders Recover while Deflation Weighs, Fed on Tap
THE TAKEWAY: Japan Machine Orders recover recent losses while deflationary pressure weighs on prices for corporate goods > Traders appear focused on Fed policy decision > USDJPY unchanged
The Japanese Yen was little changed versus the U.S. Dollar as Japanese machine orders grew by +4.6 percent month-over-month and +1.7 percent year-over-year in July. Prices for domestic corporate goods declined by -1.8 percent in August on a yearly change basis but increased slightly by +0.3 percent for the month.
Machine orders appear to have recovered some of the losses recorded in May which posted monthly declines around -14 percent. Prices for domestic corporate goods have been on the decline since August 2011 highlighting the weak fundamental backdrop the nation is facing as deflationary pressures continue to weigh.
Overall, the market seems to continually overlook fundamental data releases for Japan’s economy and instead look to trade the yen, when paired with the greenback, around QE expectations. The FOMC is scheduled to make their monthly policy decision on Thursday the 9th. Market participants appear to have priced in another round of dollar debasement since Fed Chairman Bernanke last spoke in Jackson Hole on August 31. The Central Bank assured markets that additional easing measures will be implemented as needed and expressed concern over a weak recovery in the labor market. On Friday, September 7, U.S. nonfarm payrolls printed less than robust job growth figures which fell short of expectations. The dollar slipped as traders seemed to have placed their stimulus bets.
USD/JPY, Daily Chart
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