Summary:

• Japanese GDP turns out better than initially thought showing stronger growth but weak consumption
• GBP gains in G10 as Brexit agreement has been struck
• Chinese trade data beat forecasts across the board
• US Congress delays a possible govt shutdown till 22 December

Moves across the FX market have been quite contained of late, however it does not mean that we haven’t had noteworthy macroeconomic releases. Those came mainly from Japan as a final print of Q3 GDP was revealed. It showed stronger than initially thought growth in the past quarter coming in at 0.6% qoq against the prior reading at 0.3% qoq. In terms of an annualized basis there was 2.5% compared to the consensus placed at 1.5%.

Japanese GDP beat forecast in the past quarter, however the details were not so upbeat. Source: Macrobond, XTB Research

Although on the surface everything seems to be alright, the breakdown of growth is not so encouraging as household expenditure deducted the most for many quarters. On the other hand one may notice that an acceleration was caused chiefly due to positive contributions of net exports and inventories alike casting a shadow on a qualitative side of an economic improvement.

As a result, the Japanese yen is one of the weakest currency in the G10 space, however one needs to keep in mind that the yen is barely steered by domestic data while a today’s sell-off stems from gains registered on the Japan’s stock market where the NIKKEI (JAP225 on xStation5) picked up 1.4%. In this respect, it’s worth mentioning other Asian indices which are set to close the day broadly higher in the aftermath of healthy gains on Wall Street.

The USDJPY is being driven higher in conjunction with a rebound seen in the US bond yields. 114.3 seems to be the closest resistance, however today’s jobs report could shake the pair. Source: xStation5

On the other hand the British pound is one of the best performing currency following revelations that the EU and the UK has reached a Brexit deal paving the way for trade talks. According to Juncker negotiations have been difficult for both sides and now it’s time to acknowledge that sufficient progress has been made which could enable both sides to enter the second phase of talks. Thus one may assume that the second round of negotiations will be kicked off during the EU summit scheduled for 14-15 December.

Looking back to the Asian session it’s also worth mentioning the China’s trade data beating estimates across the board. There was a $40.2 billion trade surplus in November while imports growth was 17.7% yoy against the consensus at 13% yoy  in turn exports growth was 12.3% yoy while the consensus had seen just 5.3% yoy.

The AUDUSD remains under selling pressure despite a better streak of the Chinese trade data. The pair has bounced off an upper limit of a channel recently and it has already approached an important support which could limit further downside potential. Source: xStation5

Finally let’s add that the US Congress has delayed a possible government shutdown risk by two weeks until 22 December narrowly voting in favor of it. The funding bill passed the House by a vote of 235 to 193 while 14 Democrats voted for the measure backed by the GOP leadership and 18 Republicans defecting from their party.