The Japanese yen lost a lot of ground to its forex counterparts yesterday when more sources confirmed Prime Minister Shinzo Abe’s plans to delay the next sales tax hike from the initial April 2017 schedule to October 2019. This could hurt the government’s chances of returning to a primary surplus, putting Japan at risk of suffering a potential credit rating downgrade. For Abe, delaying the consumption tax increase could help keep domestic spending and inflation afloat.
USDJPY popped up to a high of 111.35, EURJPY broke out of consolidation to test the 124.00 resistance, GBPJPY is trading above the 162.00 mark to a high of 163.90, and NZDJPY broke past the 74.50 minor psychological barrier.
Data from Japan came in mostly stronger than expected, as household spending fell 0.4% instead of the estimated 1.3% year-over-year drop while preliminary industrial production posted a 0.3% gain for April instead of the projected 1.4% decline.
AUD gets a boost from building approvals
The Australian dollar was one of the strongest performing currencies so far, as it got a boost from stronger than expected data. Building approvals jumped 3.0% in April versus expectations of a 3.1% decline. Private sector credit ticked up by 0.5% as expected while the current account deficit narrowed from 22.6 billion AUD to a 20.8 billion AUD shortfall.
AUDUSD surged past the .7200 handle to a high of .7244, AUDJPY carried on with its climb to a high of 80.63, EURAUD dropped to a low of 1.5369, and GBPAUD is down to the 2.0300 mark.
The Kiwi also scored its own gains, boosted by an improvement in the ANZ business confidence index from 6.2 to 11.3. NZDUSD rallied to a high of .6733, NZDJPY climbed to 74.74, EURNZD is down to 1.6567, and GBPNZD retreated to 2.1812.
Euro pairs to undergo additional volatility on data releases
There are plenty of medium-tier reports from the euro zone today, including the flash CPI estimates from the region. Analysts are expecting to see a 0.1% decline in headline CPI and a 0.8% uptick for the core CPI, both representing improvements from previous readings. However, weaker than expected data could be in the cards after Germany reported a larger slump in producer and input prices earlier on.
German retail sales and unemployment change data are also due today, along with French preliminary CPI figures. Downbeat results could set the tone for a dovish ECB statement scheduled later on in the week.
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