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Japanese Yen Ignores Modest Service, Composite PMI Gains

Japanese Yen Ignores Modest Service, Composite PMI Gains

David Cottle, Analyst

Talking Points:

  • The Japanese service sector forged ahead in March
  • That made for modest gains in the Composite Purchasing Managers index despite a weaker manufacturing print
  • The Japanese Yen took very little notice

The Japanese Yen was steady against the US Dollar Wednesday after the release of an encouraging Japanese economic snapshot.

The March Nikkei Purchasing Managers Index (PMI) for the service sector rose to 52.9, up from February’s 51.3. That put the composite PMI at 52.9, a more modest rise from the prior month’s 52.2 level, but quite impressive for all that. The composite comprises both service and manufacturing sector indexes. And we already knew that the manufacturing index was at a three-month low in March.

Originating in the US, PMI indexes are released in most countries and are held by investors to be among the more timely snapshots of economic health. Any reading above 50 signifies expansion for the sector in question, with a sub-50 print meaning activity shrank.

The data gel with the prevalent Japanese economic backdrop of moderate recovery, fueled largely by offshore demand, and still-weak inflation at home. As such they rather passed the foreign exchange markets by. USD/JPY was stuck around the 110.83 level before and after the data, having clawed back a bit of the ground it lost in the previous Asian session.

What data? USD/JPY

Market focus is increasingly on Thursday’s meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. Mr. Trump has had harsh words for countries which run persistent trade surpluses with the US and, although China is the “main offender” here, Japan comes in an admittedly distant second.

Investors are accordingly keen to see whether the White House is prepared to bite on this issue, after a good deal of barking.

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.