The Japanese Yen gained against the US Dollar in overnight trading, making it the seventh consecutive day the JPY as extended its gains against the USD despite Japan reporting its industrial output fell more than expected in the month of August.
Output dropped by 1.3% from July’s figure, and fell by 4.3% when compared to the previous year after analysts had been expecting a fall of 0.4%. The largest falls were seen in the cars and electronics markets as the drop in exports in key markets such as Europe and China continue to play heavily upon the Japanese economy. China is Japans largest export market and given the recent island disputes between the two nations it is a cause for concern for the future.
The JPY was down against most major currencies – down 0.05% against the EUR, down 0.08% against the AUD, down 0.23% against the NZD, down 0.07% against the CAD but the JPY found itself up against the USD – gaining 0.12% against the greenback primarily down to the weakness in the USD which is suffering after the sharp decline in durable goods and the downward revision to Q2 GDP were an unwelcome surprise to the markets. Durable goods dropped by 13.2%, the sharpest fall since January 2009 whilst GDP growth was revised down to 1.3% from 1.7%.
The weakened US Dollar saw Gold, Silver, Oil and Copper all continue to male strong gains in Asian trading overnight with Gold up 0.17%, Silver climb 0.6%, Oil rise 0.73% and Copper rise 0.76% as investors are already speculating on yet another round of quantitative easing or similar action needing to be implemented by the Fed Reserve.
Following on from yesterday’s budget in Spain which was well received by the markets, today sees French President Francoise Hollande’s first budget. It will include measures to plug a 30 bn euro hole in the finances of the country . A planned 75% tax rate is set to be imposed on annual income above 1 million euros as France struggles to meet its target of getting its deficit to less than 3% of its GDP. Unemployment in France has risen beyond 3 million, the highest amount since it entered the euro whilst its private sector output has dropped to its lowest levels in nearly 4 years.
Much of the investor focus will be on the French budget and the EUR/USD which has already risen 0.10% in Asian trading. French PPI and Italian CPI and PPI figures released in the morning should keep trading in the Euro at robust levels whilst Canadian GDP figures released later in the day are expected to be unchanged