Yen Steady as Japanese Construction Underwhelms
- Japanese housing starts expanded far more weakly in November than they had the previous month
- However, this can be a volatile series
- The real bad news was in overall construction orders, they fell sharply
November’s total starts rose by 6.7%, well below October’s strong 13.7% gain for what is admittedly a volatile series. Perhaps more worrying for policymakers in Tokyo, overall construction orders fell 6% on-year in the same month. They had been up by more than 15% the month before.
There will be some element of seasonality in these figures, most of which have been reasonably strong through the summer and early fall. All the same however, this is another weak data release from Japan’s economy.
Data already released on Tuesday showed that both “core” consumer prices and household spending were very weak in November, although employment levels held up.
USD/JPY remains very much in holiday mode though, in a week stuck between the Christmas and New Year breaks. Australia and the UK are out for holidays too, which will see trading desks there thinly staffed if they are operating at all.
The pair got up to 117.36 after the data, from 117.34 before in a market that doesn’t seem in the mood for heroics. The US Dollar has pulled back a little from the 14-year highs seen last week, but that there should be some profit taking on such gains is hardly surprising over the holiday period.
There was one bright-ish spot in the form of November’s national Consumer Price Index excluding both food and energy costs. That rose 0.2% on-year according to the Bank of Japan, a rise that, while hardly a blockbuster, was at least as expected by the markets.
Another lacklustre run of Japanese numbers won’t do any harm to the thesis that Japanese monetary policy will remain loose even as the US Federal Reserve raises rates. That in turn should support USD/JPY as part of a general turn toward a perkier greenback.
Nowhere to go… USD/JPY
Chart compiled using TradingView
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--- Written by David Cottle, DailyFX Research