The Japanese yen has ticked higher in the Thursday session. In North American trade, USD/JPY is trading at 110.37 up 0.10% on the day. On the release front, Japanese retail sales dropped to 06%, its lowest gain since October. Later in the day, Japan releases Tokyo Core CPI, which is expected to edge up to 0.6 percent. In the U.S, Final GDP in Q1 slipped to 2.0%, missing the estimate of 2.2%. Unemployment claims jumped to 227 thousand, well above the estimate of 220 thousand. On Friday, Japan releases consumer confidence. The U.S will publish consumer spending and inflation reports, as well as UoM Consumer Sentiment.
U.S numbers were soft for a second straight day on Thursday, but the dollar has managed to hold its own against the yen. Final GDP dipped to 2.0%, weaker than the second estimate of GDP in May, which showed growth of 2.0%. Much of the slowdown is being attributed to weaker consumer spending in the first quarter. There are expectations of banner growth in the second quarter, with some analysts predicting growth of over 5 percent, as the massive January tax cut should boost economic growth. However, the escalating trade war between the U.S and its trading partners, especially China, could dampen second quarter GDP. Trade tensions show no sign of easing, with President Trump threatening tariffs on some $250 billion in Chinese goods. On Thursday, U.S durable goods reports in May were a disappointment. Core durable goods orders declined 0.3%, well of the estimate of 0.5% and a 4-month low. Durable goods orders declined for a second straight month, with a reading of -0.6%. Still, this was better than the forecast of -0.9%.
As the second quarter draws to a close, the U.S economy continues to perform well. Economic growth has been strong and the labor market is close to capacity. However, the trade war between the U.S and its major partners could be the dark cloud on the horizon. The Federal Reserve now plans to raise rates four times in 2018 (up from three), but a global trade war could force the Fed to revise its forecast back to three hikes. On Tuesday, Atlanta Fed bank president Raphael Bostic said that if the trade war intensified, he would vote against a fourth rate hike, due to downside risks to the economy. Fed Chair Jerome Powell sounded pessimistic about the economic effects of trade tensions at an ECB forum earlier in June, and if other Fed members express concerns, a fourth rate hike could be delayed until 2019.
