Yen Crosses Recover After Initial Dip On Disappointing GDP

Yen edged higher after much weaker than expected GDP report from Japan prompted selling in Nikkei. But the moves quickly lost steam as yen retreats which Nikkei recovers. Nikkei dropped to a six week low of 13430.6 in initial trading but is back in positive territory at the time of writing. The Japanese GDP grew 0.6% qoq in Q2, much lower than expectation of 0.9% qoq and Q1's 1.0% qoq. GDP deflator, though, showed good improvement to -0.3% qoq comparing to expectation of -0.7% qoq, Q1's -1.1% qoq. Looking at the details, private consumption was lackluster. In particular, residential construction contracted mildly by -0.2%. Public expenditure figures were robust, but that is not sustainable given the state of government debt. The data also raised speculations that prime minister Abe might delay or reduce the planned sales tax hike.

Elsewhere, SNB vice president Danthine said that the current "absolute priority" is the Swiss Franc cap and the central bank will keep that in place "as long as necessary". And, when he noted that when the central bank raises interest rates, "there can no longer be a restricting minimum exchange rate". He also noted that on average, a rate hike will have "negative impact" on banks. And, warned that banks may "underestimate" the risks on how long the period of low interest rates will last.

Latest CFTC data showed that on August 6, comparing to the prior week, Euro's net positions turned net long, while Aussie net shorts rose to another 2013 high. Euro positions turned to net long of 6.1k, from -8.5k net shorts. That's also, the first net long since June. Yen positions were relatively unchanged at -80.2k. Sterling net shorts dropped slightly to -46.0k, from -49.5k. Canadian dollar positions were relatively unchanged at -10.4k net shorts. Australia dollar net shorts rose further to -76.8k, another 2013 high, from -72.6k.

Looking ahead, the calendar is relatively light today with Swiss retail sales and US monthly budget featured.