USD/JPY has posted considerable gains in the Tuesday session, after starting the week with losses. In the North American session, USD/JPY is trading at 106.54, up 0.61% on the day. It’s quiet on the release front, with no Japanese events. In the US, IBD/TIPP Economic Optimism dropped to 52.6, well below the estimate of 55.2 points. This marked a 4-month low. On Wednesday, the US releases two major indicators – ADP non-farm payrolls and the ISM Non-Manufacturing PMI.
The Japanese economy continues to perform well, and predictably, business confidence remains strong. The Tankan indices pointed to solid optimism in the fourth quarter, in both the services and manufacturing sectors. The manufacturing indicator edged down from 25 to 24 points, and confidence in the services sector was unchanged at 23 points. The Japanese economy continues to perform well, boosted by stronger global demand. However, the Tankan indices also reported that many businesses are reporting a shortage of skilled labor. Unemployment levels in Japan have fallen to 25-year lows, as the economy has improved while the working-age population continues to shrink.
Investors continue to monitor the tariff battle between China and the US. The week started with China retaliating and imposing its own duties on a range of US goods, including frozen pork and wines. For its part, the US is expected to list which Chinese product will be subject to US tariffs. With the two economic giants showing no signs of backing down, there are growing fears that a new global trade war could be underway. If the tit-for-tat measures continue, both the US and Chinese economies could suffer, which could lead to a global recession. The yen is a key safe-haven asset, and nervous investors could snap up the Japanese currency if there is no quick resolution to the tariff spat unleashed by US President Trump.
