Currency traders find themselves on edge yet again as speculation surrounding potential yen-buying intervention by Japan continues to dominate market sentiment. With Friday marking a holiday for most of the world, except Japan, China, and select parts of U.S. markets, traders are particularly jittery.
The yen experienced a brief dip on Wednesday, nearing a 34-year low at around 152 per dollar. This prompted an emergency meeting among Japan’s primary monetary authorities, fueling expectations of direct intervention to counter what they perceive as speculative currency trading.
Currently, the dollar has retraced to a range of 151.30 to 151.50 yen, a trend that may persist if hedge funds and speculators opt to cover their significant short yen positions.
In parallel efforts, Chinese authorities are grappling with the repercussions of yen weakness on the yuan, which reached a four-month low last week.
In Europe, the data calendar lacks excitement, with attention drawn to the final fourth-quarter GDP figures for the UK and German employment data.
Britain’s GDP contracted by 0.3% in the last quarter of 2023 and by 0.1% in the preceding quarter, meeting the criteria for a technical recession commonly observed in Europe. However, the economy displayed signs of recovery in January.
In Germany, the Bundesbank’s assessment suggested that Europe’s largest economy might have entered a recession in the first quarter of 2024. Persistent challenges such as surging energy prices and escalating borrowing costs have weighed on Germany’s economic landscape over the past year, with little indication of substantial improvement.
Nevertheless, the Bundesbank noted that businesses are retaining their workforce, hinting at a potential marginal uptick in unemployment in the upcoming quarter.
Stateside, the Federal Reserve’s preferred inflation gauge is set for release on Friday, despite U.S. markets being closed.
Analysts anticipate a 0.3% increase in the core personal consumption expenditures (PCE) price index for February, maintaining the annual pace at 2.8%. The headline index is projected to rise by 0.4% for the month and 2.4% for the year.
Key developments that could sway markets on Thursday include:
Data Releases: UK Q4 GDP, U.S. Q4 GDP, German employment data, U.S. consumer spending, U.S. University of Michigan consumer sentiment
Earnings Reports: Scout24, Sofina
Debt Auctions: UK’s reopening of one-month, three-month, and six-month government debt instruments.