USD/JPY has posted gains in the Monday session, continuing the upward movement which marked Friday trade. In the North American session, the pair is trading at 111.50, up 0.58%. On the release front, it is a quiet start to the week, with Japanese banks closed for a holiday. In the US, there are no major events on the schedule. On Tuesday, the US releases Building Permits and Housing Starts.
US releases wrapped up the week on a sour note, as retail sales reports missed expectations. Core Retail Sales slowed to 0.2%, missing the forecast of 0.5%. Retail Sales was even worse, posting a decline of 0.2%, compared to the estimate of +0.1%. Much of the slowdown in the August numbers are attributable to lower automobile sales, which have been slowing in recent months, and was likely made worse by Hurricane Harvey. These numbers underscore continuing weakness in consumer spending, despite a strong labor market. The Federal Reserve remains concerned about weak consumer spending, a key driver of economic growth, and could make reference to the lack of spending in its rate statement, which will be released later this week.
It was a rough week for the Japanese yen, as USD/JPY surged 2.4 percent. The yen pushed above the 111 level on Thursday, for the first time since August. Recent tensions between North Korea and its neighbors had boosted the yen, traditionally a safe-haven currency. North Korea had alarmed South Korea and Japan by firing missiles over Japan and testing a hydrogen bomb. However, the crisis has eased in the past week, reviving risk appetite. North Korea sent another missile over Japan last week, but this failed to put a dent in investor confidence. It’s becoming increasing doubtful that last week’s uneasy calm will continue, and that could mean more volatility from the yen. On Sunday, the US ambassador to the United Nations, Nikki Haley, warned that the UN Security Council had exhausted its options, and the US might have to refer the matter to the Pentagon. This was followed by a US-South Korean air drill on Monday.
