After a listless start to the week, USD/JPY has posted considerable gains on Tuesday. In Tuesday’s North American session, the pair is trading at 110.56, up 0.54% on the day. In the U.S., economic data disappointed. Building permits slowed to 1.30 million, shy of the estimate of 1.32 million. CB consumer confidence fell sharply to 124.1, well below the estimate of 132.1 points. In Japan, BoJ Core CPI, dropped to 0.4%, down from 0.5% in the previous release.
Japan’s economy remains fragile, with exports down due to the global trade war. BoJ policymakers remain nervous, and the summary of opinions from the March policy meeting indicated that members debated whether to ramp up stimulus in order to boost the economy. There are concerns that the economy could be heading towards a recession, given the weak global climate and the tax hike scheduled for October.
The Federal Reserve has become more dovish, leaving investors in a glum mood. At last week’s meeting, policymakers indicated they had no plans to raise interest rates in 2019 and also lowered its growth forecast for 2019 to 2.1%, down from 2.3% in December. There was more bad news on Friday, as the spread between 3-month and 10-year Treasury notes turned negative for the first time since 2007, pointing to an inverted yield curve. All eyes will be on U.S. Final GDP, which will be released on Thursday. If GDP is weaker than expected, investors could lose their risk apetite and the safe-haven yen could get a boost.
