The GBPUSD is rebounding significantly higher up the charts following an impressive UK retail sales release moments ago which has followed the path of yesterday’s jobless claims and contradicted concerns that the EU referendum outcome would have an immediate impact on the UK economy. The GBPUSD has already spiked to its highest level in nearly two weeks at 1.3163 at the time of writing, with investors enticed towards purchasing the Pound following another indication that the EU referendum outcome is not having a negative impact on the UK economy. This of course is in contradiction to previous PMI releases in the lead up to the referendum and a preliminary GDP report suggested the UK economy contracted last month. Onlookers should keep in mind that it will take time to truly access how the UK economy is performing on a consistent basis following the historic vote.
As mentioned yesterday following the employment data, economists need to be monitoring business confidence readings to then look for a possible correlation in search of a decline in future UK job vacancies. However at a time where many are expecting external investments to enter a decline, the news of an impressive retail sales shows consumers are spending and should support GDP in the meantime. Domestic consumption is going to be vital for the UK economy in the period ahead if international investment is set to drop in the uncertainty of the EU referendum outcome.
Yen rebounds once again despite alarming data
In other news, the Yen is once again showing indications of further buying demand on Thursday despite alarming trade data being released from the Japanese economy overnight. This persistent demand for the Yen has simply nothing to do with any improved confidence in the global economy, but everything to do with investors being consistently drawn towards the Yen as a safe haven as the external environment remains uncertain. The Bank of Japan (BoJ) would have certainly woke up to concerns again on Thursday following the USDJPY dropping below the heavily psychological 100 level once again, which is where expectations are high that the Japanese central bank are readily intervening in the FX market.
The trade data released from Japan overnight was alarming to say the least, I would personally add that it is only going to fuel the ongoing expectations that the Bank of Japan (BoJ) will need to launch additional monetary stimulus.
Exports collapsed by around 14% with this reportedly representing the worst decline on headline in seven years for Japan, which will only continue to strengthen concerns over global trade as a whole. Many institutions have repeatedly aired their concerns over a forthcoming slowdown in global trade, and seeing exports collapse by such an extent is only going to validate these concerns and align with similar figures being noticed across the emerging markets in recent months.
There will also be additional shocks at the news that imports collapsed at levels close to 25%. This is an astonishing decline when you not just look at the headline, but also consider that the Japanese Yen has strengthened dramatically in recent months and this should have contributed towards importing goods into Japan becoming more attractive. To briefly sum up, this appalling headline will continue to stress concerns over the ongoing weak spending across the Japanese economy and put even further pressure on the Bank of Japan (BoJ) into adding further stimulus.