With the central bank of all central banks approaching a rate lift-off, the US dollar is rearing to spring into a multi-year rally. Meanwhile, central banks in Europe, China and Japan continue devaluing their currencies in a last ditch attempt to spur inflation before the inevitable rates hike constricts global credit. Today’s GEO considers economic conditions in Japan and takes a look at the US dollar chart.
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Sun 15 November
Japan Prelim GDP q/q (actual:-0.2% expected:-0.1% previous:-0.3%)
Mon 16 November
Canada Manufacturing Sales (actual:-1.5% expected:0.3% previous:-0.6%)
Tue 17 November
UK CPI y/y (actual:-0.1% expected:-0.1% previous:-0.1%)
US CPI m/m (actual:0.2% expected:0.2% previous:-0.2%)
Wed 18 November
US FOMC Meeting Minutes
Thu 19 November
Japan Monetary Policy Statement
Fri 20 November
Europe ECB President Draghi Speaks
Canada CPI m/m (previous:0.2%)
Canada Core Retail Sales m/m (previous:0.0%)
Japan GDP data released earlier in the week showed Japan falling into technical recession, increasing pressure on the BoJ and Prime Minister Shinzo Abe to bolster the world’s third largest economy.
According to Japan Today, five things to know about Japan’s ailing economy, which sank into technical recession in the third quarter, contracting at an annualized pace of 0.8%:
Japan is the world’s third largest economy, primarily based on its exports. Successive governments have attempted to shift emphasis to domestic demand – for the most part unsuccessfully since an aging population and decades of deflation have thwarted such efforts.
The cornerstone of current Japanese economic policy is monetary stimulus – inflation of the Yen. A weaker Yen makes Japanese exports more competitive in the world market, but damages domestic consumption due to low CPI.
Tourist arrivals hit a record of 13.4mil in 2014 and the figure has increased to nearly 15mil arrivals by September 2015.
Prime Minister Shinzo Abe’s “Abenomics” program seeks to halt deflation, increase productivity and employment via strategic corporate tax incentives (for export), Yen devaluation and central bank bond buying by the BoJ.
Success of the program is debatable, since CPI has not risen by as much as expected, employment has not increased significantly, and many argue that while corporate earning have improved, the benefits for the working class has been negligible.
Figures released this past Sunday show that Japan’s GDP output is contracting, but Masayuki Ichikawa, economist at Bank of America Merrill Lynch (Tokyo), blames the contraction on inventory adjustments, and argues that “Japan’s technical recession is not a real recession“. GDP is expected to improve in the coming quarter.
The Bank of Japan will release a Monetary Policy statement on Thursday 19 November – widely expected to change little from the present stimulus-based course of “Abenomics”.
Strong US jobs data released last week increased market expectations that the Fed’s lift-off will happen this December. Fed funds futures imply a 20.5 basis point rate effective next month.
The Dollar Index (DXY) is now pushing above 99 points and the 1-day chart’s technical indicators look supportive of a push above the psychological 100 level. The bullish cross-over of the 20-day moving average above the 200-day moving average underscores the upward continuation.
This analysis is provided by xbt.social.
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Last modified (UTC): November 18, 2015 16:16