Japan’s economy shrank at a slower pace than initially estimated in the first quarter of 2021, the government’s revised data showed Tuesday, confirming the first contraction in three quarters.
The world’s third-largest economy after the U.S. and China shrank 3.9% on an annualized basis, which reflects what would happen if the first-quarter pace continued for a full year.
That compared with the 5.1% contraction in a preliminary estimate released in May. The economy shrank 1.0% from the previous quarter.
The revised data showed that capital expenditure fell 1.2% from the previous quarter, compared with an initial estimate of a 1.4% decline. Public investment fell 0.5%, slower than the 1.1% decline initially estimated.
Economists say weakness in the services sector is likely to continue to weigh on the economy in the current April-June quarter as the government’s state of emergency has been extended through June 20.
As of 4:05 pm, USD/JPY advanced with a big gap following the GDP data released:
Currently trading at JPY 109.49, the U.S. dollar is on the upside and stands above its 50-period moving average on a 30-minute chart at JPY 109.33. The intraday RSI remains within its buying area between 50 and 70, and confirms the bullish bias. Further advance is expected toward previous overlap at JPY 109.60 and toward horizontal resistance at 109.75 in extension. A third target is set at JPY 109.90. Only a break below strong horizontal support at JPY 109.15 would invalidate this bullish view and call for a down move toward previous overlap at JPY 109.00 and toward horizontal support at JPY 108.85 in extension.
#DailyBrief | Things traders need to know today:
Tuesday, June 8, 2021
👉 On Monday, U.S. stocks closed mixed. The Dow Jones Industrial Average slid 126 points to 34630, the S&P 500 eased 3 points to 4226, while the tech-heavy Nasdaq 100 rose 32 points to 13802. European stocks closed mixed. Germany’s DAX 30 dipped 0.1%, while France’s CAC 40 gained 0.4% and the U.K.’s FTSE 100 edged up 0.1%.
👉 The dollar pared a drop and Treasury yields were stable. Traders are awaiting the U.S. inflation report to gauge price pressures amid expectations the Federal Reserve in the weeks ahead will begin talking about tapering asset purchases. The ICE dollar index lost the key level of 90.00 again. The U.S. 10-year Treasury yield gained 1.7 basis points to 1.570%.
👉 EUR/USD rose 24 pips to 1.2191. In Europe, the Sentix index of investor confidence came in at 28.1 for June, higher than 25.4 expected. For the European Central Bank to achieve its inflation mandate, it will need to unveil a “dramatic” policy shift, Katherine Neiss, chief European economist at PGIM Fixed Income, says. Such a dramatic policy shift could be a significant increase to the open-ended asset purchases, when the ECB completes its inflation framework review in September, she says. “We continue leaning in the direction that [the ECB] will implement a notable policy initiative as it seeks a sustainable stabilization in chronically low realized inflation and inflation expectations,” Neiss says. The transitory rise in inflation appears to be a global phenomenon, the economist adds
👉 Sterling faces a hit from Brexit unless the U.K. can secure a trade deal with a major economy like the U.S. or China, Commerzbank says. The U.K.’s trade deal with Norway, Iceland and Liechtenstein–agreed on Friday–is worth about GBP20 billion but that’s a drop in the ocean compared with potential total trade volume, Commerzbank’s Thu Lan Nguyen says. The picture concerning trade developments remains sobering, she says. “Unless trade negotiations with one of the major economies did suddenly get off the ground, this is unlikely to change any time soon, which is not good news for sterling.” GBP/USD falls 0.3%.
👉 AUD/USD added 6 pips to 0.7754. Official data showed that China’s exports rose 27.9% over year in May (vs. +32.1% expected), and imports were up 51.1% (vs. +53.5% expected).
👉 USD/JPY dropped 25 pips to 109.27
👉 USD/CAD eased 6 pips to 1.2078.
👉 Gold added $8 to $1,899 an ounce.
👉 Oil extended a decline, losing some momentum after hitting $70 a barrel in New York for the first time in over two years. U.S. WTI crude futures settled flat at $69.23 a barrel.
👉 Bitcoin struggled in the $35,000 region, while Ether was little changed around $2,700.
