Yen weakens after weak inflation data from Japan
The Japanese yen declined slightly today after weak CPI numbers from the country. In January, the national CPI rose by 0.2%, which was lower than December’s CPI of 0.3%. The national core CPI rose by 0.8% in the month, which was slightly higher than December’s 0.7%. In recent years, Japan has had very low inflation, despite the BOJ’s large quantitative easing program and negative interest rates. The low inflation rate has made it very difficult for the BOJ to increase interest rates.
Focus will remain on the euro, because of the vital information that is expected today. In the morning hours, Germany will release its Q4 GDP reading. The number is expected to show that the economy expanded by 0.9% in the quarter. Later on, traders will receive the business expectations and climate data from ifo. The ifo business climate index is expected to be at 99, which will be slightly lower than the expected 99.1. Next, the European Union will release the inflation numbers, which are expected to show that the CPI remained unchanged at 1.4% in January. The core CPI is expected to remain unchanged at 1.1%.
Investors will also focus on Brexit and trade news. With just a month before the UK completely leaves the European Union, there are concerns that the country is at risk of leaving without a deal. Talks between Theresa May and EU leaders have not been fruitful. This is because the EU accuse May of not knowing what she wants. Observers believe that she is buying time to force the MPs to vote for her deal just before the deadline. Regarding trade, investors will focus on the US-China talks, and the US-EU standoff.
The EUR/USD pair was little moved in overnight trading. The pair is currently trading at 1.1355, which is along the 21-day and 42-day EMA. As a result, the EMA has been largely unmoved and is currently at the 47 level. The pair is currently in consolidation mode, and it could move in either direction. This will mostly depend on the inflation, confidence, and GDP numbers from Europe.
The USD/JPY pair was also unmoved in the Asian session. The pair has been in consolidation mode for the past few days, which makes the price along the 21-day and 42-day EMAs. It is now trading at 110.766, which is along the upper band of the Bollinger Bands. The pair could remain within this channel because there will be no major data from the US and Japan today.
The GBP/USD pair too was little moved today but the pair is up for the week as investors hope that a no-deal Brexit can be averted. The pair is now trading at 1.3027. This price is slightly above the 21-day and 42-day EMAs. The RSI has fallen from an overbought level of 75 to the current 55. The On Balance Volume has moved slightly lower. The pair’s movement today will depend on the progress on Brexit.