Talking Points:
- The Japanese Yen was unimpressed as Composite and Service PMIs crossed the wires
- The data showed Japan’s service sector expanding at fastest pace in about 1 year
- The anti-risk Yen was inversely following Nikkei 225 futures as they fell on Tokyo open
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The Japanese Yen showed a tepid reaction against its major counterparts after a set of composite and service-sector PMI figurescrossed the wires. Keep in mind that a reading above 50 indicates expansion while a reading below 50 points to contraction.
In December, Japan’s service PMI clocked in at 52.3 versus 51.8 in November. This marks the fastest pace of growth since January 2016. Meanwhile, the composite reading came in at 52.8 from 52.0 prior. This is the quickest pace of overall expansion since August 2015.
Seeing that the Bank of Japan left its monetary policy stance unchanged in December can help unravel why the Yen was uninspired by today’s PMI readings. The central bank noted that its main aim at the moment is to implement “yield curve control” and to keep 10 year government bond yields at 0. Upbeat news may have have passed largely unnoticed given this dovish posture.
Looking at the 5-minute chart below of USD/JPY, it can be seen that the pair was following Nikkei 225 futures lower as the Tokyo stock exchanged opened. When the data crossed the wires, the pair briefly halted its decline before following the index further downward.
Chart compiled in TradingView
