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Yen down on weaker inflation figures

Summary:

  • Yen is the weakest G10 currency after weaker Tokyo inflation report
  • Equity markets in Asia remain unimpressed
  • Precious metals ease today after yesterday’s bounce 

Asian session was relatively benign with only minor moves taking place across the FX and equity sphere. On the currency front the Japanese yen is the weakest G10 currency following disappointing figures on inflation from Tokyo. Tokyo figures are important as they are released far earlier than nationwide inflation and thus seen as a good gauge of inflation trends in the economy. Figures for May were soft: headline inflation declined from 0.5% to 0.4% y/y and core inflation (ex fresh food and energy) was down from 0.3 to 0.2% y/y (both figures were expected at unchanged levels). That’s a disappointment, especially when compared to the US where the headline inflation was at 2.5% in April and looks set to jump further in May. Furthermore keep in mind that the Japanese economy showed a contraction in the first quarter. That picture means that a recovery that the Bank of Japan would like to see is still far away and any changes to extremely aggressive monetary policy are unlikely. The yen is down as a result but the moves are not huge - USDJPY is up 0.3%.   

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USDJPY inched up today but a break of a trend-line still sees a test of 108.20 as a possible scenario. Source: xStation5 

Equities looks weak again

Weaker yen was welcomed by Nikkei as the Japanese market is the strongest in Asia. Other exchanges do not look so well especially with the Chinese indices down. A cancelled meeting with Kim Jong Un and concerns over new tariffs may cool down sentiment until the end of the week.

Precious metals down, but...

Gold and silver a down a bit today after yesterday’s bounce. These markets rallied on Thursday as it became clear that there will be no meeting between Trump and Un, at least not now. Traders generally see this situation as "fixable" and do not see an imminent risk of escalation, although obviously the uncertainty is on the rise. Keep in mind that metals, especially silver, are still holding up relatively well given recent appreciation of the US dollar.   

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Silver prices were able to defend 16.00 support despite a period of strong dollar. Bulls need to break out of a triangle in order to capitalize from this relative strength. Source: xStation5 

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