Earthquake Rocks Japan and Yen Moves Higher
China, the world’s second largest economy, reported a slew of economic data. Activity and growth appears to be leveling off and price pressures may have begun stabilizing.
One of the key issues has been inflation and February CPI came in at 4.9%, the same as in January and a bit higher than the “leaks” in the local press. The other key is retail sales which rose 11.6% on a year-over-year basis, matching the slowest rate since March 2006. That said, industrial production came in at 14.1% and investment were reported stronger than expected and this would seem to point to only a modest slowdown.
Yesterday’s Trade deficit create a quick movement amongst traders to a flight to quality or safe haven which had the dollar rally and equities across the globe decline.
UK PPI came in less than expected which could take some of the pressure to tighten away from the Bank of England. PPI Input came out at an increase of 1.1% on a month over month basis compared to the 1.5% expected by analysts. PPI output increased by .5% compared to the .6% expected by economists. the Pound continued to fall as expectation of a rate hike by the BOE are beginning to come into question. The Pound declined below 1.60, but was above to rebound off of the 50-day moving average.
The Yen continued to strengthen as investor believe that there will be Yen repatriation after the 8.9 magnitude earthquake that hit the country on Friday. And judging from the margin trading figures, retail in Japan, which industry estimates suggests could be in excess of 25% of the Japan’s foreign exchange turnover, had built a large long dollar position. Market talk suggest the liquidation of these dollars and may have been a key factor driving the dollar from above JPY83.20 to JPY82.00 and in the process adding to the weight on other major currencies as short-term cross positions are forced to unwind. The BOJ is expected to meet on Monday and discuss issues to help the Japanese economy.
