USD/JPY Will Not Stay In Range For Too Long With The Fed And The NFP

This was the week: All the negotiations are stuck

Negotiations between the US and China did not go anywhere fast. It culminated with reports that some talks were canceled, but these stories were denied. Nevertheless, there is no breakthrough, and it does not help sentiment. US Commerce Secretary Wilbur Ross said that China and the US are “miles away.”

The Chinese economy grew by 6.6% in 2018, as expected, but this is the slowest pace since 1990. The data sent shivers down the spines of financial markets.

In the US negotiations between President Donald Trump and Democrats are stuck. Attempts to find a compromise failed, and Trump’s State of the Union address was canceled by Hosue Speaker Nancy Pelosi.

The government shutdown affects around 800,000 workers that are not receiving paychecks. The longer it lasts, the more devastating the economic damage. Also, the government is not publishing the full range of economic indicators, and in some cases, no data is collected.

After the cancellation of Durable Goods Orders, the preliminary GDP report for Q4 is in doubt as well. Among the figures that did come out, Existing Home Sales disappointed by dipping just below 5 million units annualized, exposing the weakness of the sector. On the other hand, Initial Jobless Claims dropped to 199K, the lowest since 1969.

Another front where there is no progress is Brexit. The UK Parliament debates various motions including options to prevent a hard Brexit and an option to postpone Brexit. So far, markets are optimistic.

The Bank of Japan downgraded its inflation forecasts, basically acknowledging reality. The move was expected, and the BOJ remains the most dovish central bank in the developed world.

All in all, markets remain concerned about the global slowdown, and this keeps the pair pressured.

US events: NFP and the Fed stand out

Tuesday is a warm-up with the S&P Case Shiller HPI that provides another look at the housing sector. Also, the Conference Board’s Consumer Confidence measure will likely slide in January, following the drop in the University of Michigan’s parallel gauge.

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