The USDJPY exchange rate could be driven by Japanese GDP growth data on Monday.
USDJPY – Daily Chart
The USDJPY is still trading between levels around 150.00 and the 156.75-1580.00 resistance. A two-day sell-off into the weekend could see a support test, but the data will decide.
The Japanese GDP data will be released at 7:50 am HKT, with a 0.3% growth rate expected for Q4. The annual pace is expected to be 1%, which is down from 1% in the previous reading.
On Friday, Japan’s economic Minister, Ryosei Akazawa, said that authorities will respond appropriately to US tariffs. Akazawa further stated that the weak Japanese Yen has a variety of impacts on Japan’s real economy.
The US economy still has some issues, with retail spending falling for the first time since August. Retail sales dropped -0.9% in January from the prior month, the Commerce Department said. That was sharply lower than December’s 0.7% gain and well below economists’ expectations of a 0.4% decline. Inflation is still an issue for consumers, but credit and lower wages are likely the main reasons.
Shoppers cooled their spending across multiple categories last month, with speciality stores and auto dealers hit hardest, with spending falling 4.6% and 3%, respectively. Sales at retailers and food courts account for almost a third of overall spending in the country. The American economy is driven by consumer spending, accounting for about 70% of economic output.
China’s 10% additional tariff on vehicles with larger engines imported from the US took effect on Monday. Exports are small compared to the number of cars produced, but the mood is leading to investors’ fears about various investment sectors.
Former US Treasury Secretary Larry Summers also said tariffs could create higher inflation.
“This is a self-inflicted wound on the American economy,” Summers said. “I’d expect inflation over the next three or four months to be higher as a consequence, because the price level has to go up when you put a levy on goods that people are buying”.
With a strained consumer, the tariffs will also lead to a slowdown in demand for overseas products and will hurt exporters.
