The Japanese yen has started the week with small gains, after trading sideways on Friday. In the Monday session, USD/JPY is trading at 109.63, up 0.22% on the day. On the release front, Japanese PPI edged lower to 2.0%, matching the forecast. There are no US economic releases on the schedule. On Tuesday, the U.S releases retail sales and core retail sales.
Has the impressive streak come to an end? Japan has boasted eight consecutive quarters of economic growth, but the first quarter appears likely to buck the trend. The economy is expected to contract at an annualized rate of 0.2% in Q1, compared to strong growth of 1.6% in the fourth quarter. The sharp slowdown is being attributed to weak consumer spending and softer global demand for Japanese exports. Still, analysts are viewing the Q1 report card as a temporary blip, with second-quarter expected to rebound with annualized growth of 1.0%.
With the U.S economy firing on all cylinders, the U.S consumer is feeling very optimistic. On Friday, the UoM Consumer Sentiment improved to 98.8 in April, beating the estimate of 98.4 points. The U.S labor market is at near or full employment, which has resulted in a slowdown in job growth due to a shortage of skilled workers. This was underscored last week, as JOLTS Job Openings climbed to a record 6.6 million. At the same time, inflation levels remain low, as the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. The odds of a rate hike at the June hike stands close to 100%.
