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The Yen Continued to Weaken, Sterling was Also on the Move

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The Yen Continued to Weaken, Sterling was Also on the Move

The yen continued to weaken on Friday pushing up to 105 for the first time since 2008. Sterling was also on the move breaking out above resistance levels and touching 1.65 for the first time since 2011. The 10-year US benchmark treasury yield cracked the 3% level, driving the interest rate differential in the US’s favor. Inflation in Japan moved higher, but industrial production disappointed, while retail sales in Japan came in better than expected.

Japanese November consumer price index printed in line with expectation at 1.5% year over year but core, which excludes fresh food, was slightly higher than expected printing at 1.2% year over year. This is the highest CPI level since 2008 and the inflation gauge is moving toward the Bank of Japan’s target of 2.0%.

Japanese Industrial production data for November came in at 5.0% year over year, lower than the 5.4% expected by economists. Retail sales surprised on the upside, however, rising 1.9% year over year, compared to forecasts for just 1.0%.

Holiday shopping in the UK came in slightly better than expected. Retailers in the UK registered a 1.5% increase in foot traffic during Boxing Day, and according to the Telegraph, British retails saw a record 2.7 billion pounds in spending.

Overall spending in the US was also better. MasterCard Advisors SpendingPulse reported that sales rose by 2.3% between November 1 and December 24, up from 0.7% in the same period last year.

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Sterling broke out above the 1.65 resistance level and is poised to test 1.67. Momentum on the currency pair is strong as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The RSI is moving higher with price action reflecting accelerating momentum.

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