Trade Desk Thoughts - Japanese Final GDP

Japanese Final GDP Actual -0.7 %, Expected -1.0%, Previous -0.6%

Release Explanation: It measures the monetary value of all goods and services produced within a Country’s borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy’s overall health. It includes all Company and Personal consumption, government outlays, investments, and exports fewer imports, that occur within a defined territory. A strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slowdown in the economic business cycle. The yearly forecast is as important as the actual release number.

Trade Desk Thoughts: The Japanese economy contracted more than the government initially stated last quarter as businesses cut their spending. The gross domestic product shrank an annualized 3 percent in the 3 months to June. Bank of Japan Governor Masaaki Shirakawa stated last week that the world’s second largest economy is likely to “remain sluggish for the time being”, which means little room for rate cuts or any form of a government stimulus. Stalled growth and the fastest inflation seen in nearly a decade have created many problems lately for the Bank of Japan, which will probably keep interest rates unchanged for the remainder of 2008.

Forex Technical Reaction: After finding support from the 50 and 100 day SMA the Japanese yen has moved very little in response to this release. The pair is currently trading above the neutral LFB pivot point at 107.04.

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