The Japanese yen has edged lower in the Thursday session. In North American trade, USD/JPY is trading at 112.50, up 0.22% on the day. On the release front, Japanese SPPI ticked lower to 1.2%, matching the forecast. We’ll get another look at Japanese inflation, with the release of Tokyo Core CPI. The key indicator is expected to remain pegged at 1.0%. In the U.S, durable good orders were a mixed bag. Core durable goods orders remained stuck at 0.1%, missing the estimate of 0.5%. There was better news from durable goods, which fell to 0.8%, but was well above the forecast orders of -1.3%. Unemployment claims rose to 215 thousand, a shade above the forecast of 214 thousand. On Friday, the U.S publishes Advance GDP and UoM Consumer Sentiment.
The Japanese economy is heavily dependent on exports, so the simmering trade war between the U.S and China remains a serious headache for Japanese policymakers. A Japanese government report released this week sounded pessimistic about the export sector. The report lowered its forecast for exports, due to the ongoing trade war. The report said that exports were flat, but also noted that the Japanese economy continued to recover at a moderate pace. President Trump has spared Japan’s auto sector from tariffs for now, but that could easily change with an unpredictable President Trump. Chinese growth slipped in the third quarter, which is bad news for Japan, as China is Japan’s largest trading partner.
Will we see a fourth rate hike in 2018 from the Federal Reserve? The odds of a December hike stand at 70%, according to the CME Group. As for next year, the general consensus is that there will be three rate increases. This sentiment was reinforced on Wednesday by Dallas Federal Reserve Bank President Robert Kaplan on Wednesday. Kaplan said he expects rates to rise into a range of 2.5% to 2.75%, or more likely, into a range of 2.75% to 3.00%. Kaplan noted that his estimate of a “neutral rate’ is slightly below 3% – anything above this level would move rates into a “restrictive’ stance, which could hamper economic growth and push inflation lower. The stock markets received a jolt this week as Chinese growth slipped to a 10-year low in the third quarter, and further weak numbers out of China could affect the U.S economy and cause the Fed to scale back its rate hike plans for 2019.
