The Japanese yen surges in Asian session as market turned into risk-off mode on terror attacks in Paris . Meanwhile, Euro is also trading broadly lower. In particular, EUR/JPY dipped to as low as 130.64 and resumed recent decline from 141.04. In latest developments, French air force dropped 20 bombs to Islamic State's Raqqa stronghold in Syria as retaliation. Islamic State already claimed responsibility for the shooting and suicide bombings in attack on Friday that killed more than 130 people. G20 leaders are convening a summit on Sunday and Monday in Turkey and are expected to issue a common response. In the near term, the financial markets would likely stay in risk averse mode.
Released from Japan, GDP contracted -0.2% qoq in Q3, worse that expectation of -0.1% qoq. The data also showed that Japan relapsed into recession with Q2 GDP also contracted -0.3% qoq. GDP deflator rose 2.0% yoy versus expectation of 1.7% yoy. The data was seen as a blow to so called Abenomics. Nonetheless, some economists noted that the overall picture was not too bad excluding the impact from the large drop in inventory and weak capital spending. And also, BoJ is expected to keep policies unchanged later this week in its scheduled meeting.
Also released in Asian session, New Zealand retail sales rose 1.6% qoq in Q3, above expectation of 1.0% qoq. Core retail sales rose 1.0% versus expectation of 1.4% qoq. UK Rightmove hour prices dropped -1.3% mom in November. Looking ahead, Eurozone will release CPI final today. Canada will release manufacturing shipments and international securities transactions. US will release Empire State manufacturing index.
For the week ahead, inflation data could be the main driver in the market in addition to geopolitical developments. In particular, UK CPI and US CPI would be closely watched on Tuesday. And upside surprise in US CPI would further solidify the case for Fed to hike rate in December. Here are some highlights for the week:
- Tuesday: RBA minutes; UK CPI, PPI; Eurozone ZEW; US CPI, industrial production, NAHB housing index
- Wednesday: US housing starts and building permits, FOMC minutes
- Thursday: BoJ policy decision, Japan trade balance; Swiss trade balance' UK retail sales; ECB minutes; US jobless claims, Philly Fed survey
- Friday: German PPI; UK public sector net borrowing; Canada CPI, retail sales