The Japanese yen has posted small losses on Thursday session, erasing the gains which marked the Wednesday session. Currently, USD/JPY is trading at 112.40. On the release front, it’s another light day. Japanese Preliminary Machine Tool Orders posted a gain of 3.5%, a second straight gain after a long streak of declines. In the US, today’s highlight is unemployment claims, with the indicator expected to climb to 249 thousand. On Friday, the US releases UoM Consumer Sentiment. The markets aren’t expecting much movement, with a forecast of 97.9 points.
On Friday, Japanese Prime Minister Shinzo Abe comes to Washington, where he will hold talks with President Trump. The meeting comes at an important time, as both sides will be hoping to smooth some ruffled feathers. One of Trump’s first moves in office was to withdraw the US from the Trans-Pacific Partnership, a trade deal which Japan has strongly endorsed. Trump recently accused Japan of unfair trade practices in its ultra-loose monetary policy, which has kept the yen at low levels and helped boost Japanese exports. The Japanese have argued that they are not targeting the yen’s value, but rather trying to combat deflation. Still, Abe will have his work cut out for in trying to assuage Trump, who has shown little patience with US trading partners and has repeatedly made protectionist statements. Japan is heavily reliant on its export sector, and the last thing it needs is a trade war with the United States. Abe is expected to defuse the currency spat by suggesting that the US and Japan discuss currency policy at the next G7 meeting.
Donald Trump hammered away at the economy during the election campaign, but was short on specifics as far as remedies. However, he did promise a significant fiscal boost through infrastructure spending and tax cuts. This led to a post-election euphoria in the markets and boosted the US dollar. Fast forward to February, and optimism has been replaced by caution and unease, as Trump continues to entangle himself in controversy, both with US trading partners and at home, with the media and Supreme Court. The markets are disappointed that Trump has not unveiled an economic plan or blueprint, limiting himself to protectionist rhetoric which has sent alarm bells ringing worldwide. On Wednesday, Goldman Sachs forecast that the administration won’t implement tax reform or infrastructure spending before 2018.
