The US dollar backed off its 12 ½ year high versus the yen, following some positive economic data out of Japan and a warning by Japan’s Finance minister that he was watching market movements closely. Despite worries about Greece, the euro was off its 1.0819 lows of a couple of days ago at 1.0930.
There were a number of data releases out of Japan that appeared to be helping the yen and preventing it from registering fresh lows. First of all core inflation was slightly higher-than-expected on the national level (April) as well as for Tokyo (May). Headline inflation was low of course, at just 0.6% year-on-year on a national basis during April – showing what a mountain Japanese inflation has to climb in order to hit 2% – the Bank of Japan’s target. Secondly, industrial production was also better-than-estimates during April, while the unemployment rate and the jobs-to-applicants ratio also surprised positively; showing a tight labor market in the country. Household spending was the one number that was deeply disappointing, but the miss could have something to do with methodological issues as it was simply too big to explain otherwise.
Despite the short-term boost that the yen received from Finance Minister Aso the previous day, in a partial reversal Economy Minister Amari said that he couldn’t conclude whether current foreign exchange moves constituted excessive yen weakness. The yen was trading near 124 versus the dollar at 123.90. The euro also made some gains versus the yen; registering a 10-day high at 135.90.
In other economic news, the US dollar was helped by the previous day’s healthy pending home sales for April figures. Swiss GDP for the first quarter came in lower-than-expected, while German retail sales for April showed consumption overall positive for the Eurozone’s largest economy.
Looking ahead to the remainder of the day, the focus will be on the revision to US GDP growth figures for the first quarter. US GDP is expected to have contracted by 0.8% on an annualized basis compared to the initial estimate of a 0.2% growth rate. Negative inventory effects and a bigger-than-anticipated trade deficit were the main reasons for the expected revision. Final University of Michigan consumer sentiment numbers will also be interesting given the very substantial drop of the preliminary numbers.