JPY Q3 GDP revised lower
AUD Lending slows
DEM Trade surplus hits record high
USD NFPs on tap
A quiet night of trading ahead of the notorious US NFP release at 13:30GMT found the greenback firming against pound and yen, with GBP/USD testing the 1.9600 level and USD/JPY slowly edging up towards 115.60. Meanwhile, EUR/USD held between 1.3270/90 as impressive German economic data and yesterdays ECB commentary kept euro bid. The trade balance in Germany surged higher than expected, with the breakdown showing that exports continued to fuel economic growth in the month of October. Additionally, ECB President Jean-Claude Trichet left the door open yesterday to additional policy tightening following the most recent hike to 3.50%. Todays NFP release will be make-or-break for the EUR/USD pair, however, as a disappointing reading could cue the Fed to cut sooner rather than later, which would bring the carry trade differential between USD and EUR to narrow. On the other hand if the US job picture proves resilient, the EUR/USD may well retrace to the 1.3100 level.
In Japan, dismal economic news continues to leave traders wondering if the Bank of Japan can really follow through on their crusade to normalize rates. The final reading of Q3 GDP was revised down to 0.3%, putting the annual rate at 0.8% - the lowest since Q4 2004 while the Eco Watchers man-in-the-street survey dipped below the 50 boom/bust level to 48.9. As we found earlier this week, CapEx has slowed, meaning business spending will not be able to propel expansion at its previous pace. Meanwhile, consumers remain extremely pessimistic, which has little hope of translating into consumption growth. Although exports may continue to nudge Japanese expansion along, the economy at large appears to be highly vulnerable. Nevertheless, as recently as Tuesday, BOJ policy maker Atsushi Mizuno reiterated that soft Japanese consumer spending would not dissuade the central bank from raising rates, expressing full confidence that wages and spending will begin to catch up with the overall growth of the economy. Unfortunately, traders are going to have to wait until December 18th for the BOJs target rate announcement to see just how hawkish and optimistic the central bank is feeling.
