Japanese GDP data beats expectations

Wednesday, May 20, 2015

Asian equities rallied higher overnight following a strong session in Europe with Chinese mainland equity indices leading the charge higher as both the Shanghai Composite and CSI 300 added over 2%. Japanese investors gained some lift from better than expected first quarter GDP data which saw the economy expand by a seasonally adjusted 0.6% q/q, against expectations of 0.4% q/q. While this was a material improvement from the previous quarter’s reading of 0.3% q/q the gradual improvement could spur the Bank of Japan to initiate additional monetary easing, as private consumption and business spending proved to be the driving force behind the better than expected growth figures.

The yen weakened for a fifth straight session against the dollar overnight, trading above 121.00 for the first time since mid-March as the currency remained on track to post its longest losing streak against the dollar since December last year. Despite losing further ground against the dollar the Japanese yen remains broadly within the multi-month trading range with near term resistance towards 122.00 potentially preventing any further slide. Investors expect the Bank of Japan to hold steady with its stimulus, maintaining an 80tn yen expansion in the monetary base on an annual basis, but any further increase in liquidity could see the yen give up further ground against the USD.

Angela Merkel and Francois Hollande have given Greece until the end of the month to reach a deal on its bailout programme as patience among eurozone officials started to wear thin. Crucial to the negotiations will be how things play out at a European Union meeting later this week in Riga, Latvia. Both the German Chancellor and French President have made it clear that Greece staying in the eurozone is in everyone’s interests but with talks stalling on pension and labour market reforms the four month stand-off has rubbed many officials the wrong way and seen an uptick in market volatility on the uncertainty. The euro held on track to post losses for a third straight day with activity early this morning pushing the single currency towards 1.1000 against the dollar. 

Japan's Q1 GDP growth rate beats expectations

JGDPQGDP Index Japan GDP Real C 2015 05 20 07 30 04

JPY continues to weaken against USD

JPY Curncy Japanese Yen Spot 2015 05 20 07 47 25

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Topics: GDP, JPY, BoJ
More from: Kash Kamal