USD/JPY Is Set To Rock On Japanese Events For A Change

A good deal or only a prolonged trade truce? Investors are still trying to parse through the Sino-American trade agreement and assess the prospects for the next steps. The mood remains positive, but USD/JPY seems to have reached its limits. Japan is in the spotlight for a change as US data takes a step back.

This week in USD/JPY: Trade dominates trading

President Donald Trump and Chinese Vice Premier Liu He finally signed Phase One of the trade deal in a grandiose ceremony. Beijing committed to buying considerable amounts of American goods but wants to see “competitive prices” – that could make implementation and enforcement tricky.

On the upside, Washington has brought China to promise to remove requirements for technology transfer, improve intellectual property protections, and eliminate ownership restrictions.

The Chinese media has echoed Trump’s upbeat sentiment on the accord, but both sides seem to disagree on the path forward. While US Vice President Mike Pence said initial discussions about Phase Two are underway, China’s He said it would be “unwise” to rush into new talks.

Overall, markets are content with the relative calm but wary, this could be a truce. USD/JPY topped 110 and hit eight-month highs, but fell back below the round level later on.

US data has been satisfactory, with the Consumer Price Index rising to 2.3% and Core CPI holding onto that level. Retail Sales figures beat expectations with substantial rises. The all-important Control Group rose by 0.5% in the last month of 2019.

Federal Reserve officials have reaffirmed the bank’s content with current monetary policy, and benign inflation means there is no urge to act in either way.

Iran kept fading away from global interest. While European countries announced new sanctions, the military calm in Iraq and elsewhere in the region initially weighed on the safe-haven yen and later disappeared from traders’ radars.

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