USD/JPY is almost unchanged on Tuesday. In the North American session, the pair is trading at 111.33, down 0.02% on the day. On the release front, U.S. manufacturing data was dismal. Durable Goods Orders plunged 1.6%, worse than the estimate of -1.1%. Core Durable Goods Orders posted a weak gain of 0.1%, shy of the estimate of 0.3%. There are no Japanese events on the calendar. On Wednesday, the U.S. releases ISM Non-Manufacturing PMI and ADP nonfarm payrolls.

The dollar is steady on Tuesday, despite the disappointing manufacturing data. This comes on the heels of weak retail sales numbers for March. Retail sales declined by 0.2%, shy of the estimate of +0.3%. Core retail sales declined by 0.4%, a sharp drop from the 0.9% gain a month earlier. Both indicators posted a second decline in three months, which is bound to raise concerns about the strength of the economy. Growth for the first quarter could be as low as 0.8% annualized, compared to 2.2% in the third quarter.

The well-respected Japanese Tankan indices pointed to weaker economic activity in the fourth quarter. This was particularly glaring in manufacturing, as the Tankan index slumped to 12 points, down from 19 points in the third quarter. This was the weakest score since 2013. The slowdown in the services index was less pronounced – falling from 24 in Q3 to 21 in Q4. The steep drop in manufacturing was expected, as less global demand for Japanese exports has taken a bite out of manufacturing activity.

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