The Japanese yen has ticked lower in the Wednesday session. In the North American session, USD/JPY is trading at 112.77, down 0.10% on the day. On the release front, U.S housing numbers were softer than expected. Building Permits dropped to 1.27 million, shy of the estimate of 1.33 million. Housing Starts fell sharply to 1.17 million, down from 1.35 million. This was well below the estimate of 1.32 million. Later in the day, Federal Reserve Chair Jerome Powell testifies before the House Financial Services Committee. Japan will release trade balance, which is expected to rebound with a surplus of JPY 0.15 trillion. On Thursday, the U.S releases the Philly Fed Manufacturing Index and unemployment claims.
Fed Reserve Chair Jerome Powell reaffirmed his positive outlook on the U.S economy in testimony before the Senate Banking Committee. Powell said that he expected the labor market to remain tight and inflation to stay close to the Fed’s target of 2 percent for the next several years. Powell added that the Fed would continue to gradually raise interest rates. Lawmakers appeared satisfied with current monetary policy, but Powell did face some pointed questions regarding the escalating trade war, which has raised concerns that economy could take a downturn if the tariff battles continue.
The escalating global trade war has gripped the markets for weeks, but there was a welcome move in the other direction earlier this week. Japan and the EU signed a free trade agreement, which will eliminate most of the tariffs on trade between the two parties. At the signing ceremony, Prime Minister Shinzo Abe and European Council head Donald Tusk said that the deal is a response to growing concerns about protectionism. Although most tariffs between the two sides are low, the agreement will be beneficial for Japanese car makers and European food producers. No less important, the agreement marks the largest free trade agreement in the world, as the EU and Japan cover about one-third of global GDP and some 600 million people.
