Market Drivers for August 29th, 2013
UK Parliament votes no on Syria, no impact on cable
Euro Retail Sales miss but prior revised up
Nikkei -.81% Europe .57%
Oil $107/bbl
Gold $1408/oz.

Europe and Asia:
JPY Unemployment rate 3.8% vs. 3.9%
JPY Tokyo Core CPI 0.4% vs. 0.4%
JPY Household spending 0.1% vs. 0.4%
JPY IP 3.2% vs 3.9%
EUR GE Retail Sales -1.4% vs. 0.5%
GBP Net lending 1.3B vs. 1.7B

North America:
USD Personal Spending/Income 8:30
USD Chicago PMI 9:45
USD U of M 9:55

Its been a listless quiet night of trade on the final day of the month as major pairs remained within very tight ranges during Asian and early European session with little newsflow to move the markets. On the geopolitical front the UK Parliament voted to not engage militarily in Syria and although US reaffirmed its commitment to a response the market appears to be losing interest in the Syria story as any military action is now likely to be delayed.

In Japan the deluge of economic data provided little clarity with some the results decidedly mixed. Japan’s unemployment rate declined to 3.8% from 3.9% the month prior as labor conditions continued to improve, and Tokyo CPI remained at 0.4% showing signs that Abenomics is making headway against deflation. However, household spending remained weak rising only 0.1% from 0.4% forecast and Industrial Production rose only 3.2% versus 3.9% eyed.

Japan’s Finance Minister Aso stated that the economic indicators are improving and noted that the data will affect the decision on sales tax. However, the improvements in Japanese economic performance are clearly modest at best and the imposition of the sales tax could hurt the nascent economic recovery.

In order to spur growth and reflate the economy, Japanese policy makers need a much weaker yen that will remain consistently above the 100.00 level. However, their attempts at fiscal responsibility may have the opposite impact if the cooling in demand curbs growth and sends the Nikkei lower unleashing another round of risk aversion that could strengthen the yen further.

Although USD/JPY has been able to find support at the 97.00 figure, the pair continues to be rejected at the 98.50 level despite better US economic data and its overall trend remains down. With the Fed taper story still uncertain and the prospect of the sales tax still dogging the Japanese economy the pair could remain in this very tight range until next week’s US NFPs provide some clarity.

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