Japan's fourth quarter GDP rose rapidly from the previous period. However, the risk of a trade war that still looms makes the Yen unable to strengthen against the US Dollar. Japan's Statistics Department on Thursday (14/2) released GDP data during the fourth quarter of last year, which rebounded with an expansion rate of 1.4% YoY.
Business and consumer spending recovered after the previous quarter was affected by natural disasters. However, global trade protectionism, especially from the US, still overshadows the Japanese economy to date. In accordance with economists' expectations, Japan's GDP grew 1.4% YoY during the fourth quarter of 2018, up from the minus 2.5 percent level achieved in the third quarter.
In quarterly calculations, IV quarter Japanese GDP grew by 0.3 percent, lower than the 0.4 percent forecast by economists earlier. However, the figure is still better than the Q / Q report in the third quarter which slipped to -0.7 percent.
Japan Still Shadowed By US-China Trade War
One of the factors underlying the rebound in Japan's GDP in the fourth quarter of 2018 was the rise in export data by 0.9 percent in the October-December period. That growth is the fastest in the past year. Apart from the increase in exports, some economists remain worried if Japanese exports will weaken this year.
This would happen if the US-China fails to reach an agreement in the trade talks that took place in Beijing this week. Japan's Export Sector will be even harder if the US really raises new import tariffs on Chinese products in March. Learn more about forex at Didimax, from news to classes that will help your trading journey. You can also learn forex with a mentor from Didimax.
USD/JPY Continues to Advance
The fourth quarter of Japan's GDP rebound has no significant effect on the movement of the Yen. Market concerns about the risk of a trade war against the Japanese economy seem to continue to bring the US Dollar higher versus the Yen.
In the Asian session, USD/CHF had turned upside down to 110 pips in just a few minutes. The trigger: algo-trading which coincides with a Japanese holiday. In the Asian session trading this morning (11 / February), the USD/CHF currency pair was volatile for a moment. Swissy slipped as fast as lightning until USD/ HF hit a record high since November at the level of 1,009, but then immediately turned back to around 0.9990 at almost the same rate.
According to a Bloomberg report, the shortfall of the Swiss Franc to almost 1 percent was due to thin market liquidity earlier this week, amid holidays of Japanese banks. The same thing happened in the Yen against the Australian Dollar on January 3. At that time, the Yen surged lightly almost 8 percent, as Japanese banks were preparing to face the New Year's holiday.
Japanese Holidays Can Trigger Anomalies in the Forex Market
Rodrigo Catril, Senior Forex Strategy Expert at National Australia Bank Ltd, Sydney, said that the lack of liquidity is a common factor in these events. Traders and experts now have large Japanese calendar printed on their desks, he said. According to Catril, the movement might initially be triggered by an error when inputting data. This resulted in a series of automatic trading executions by certain algorithm-controlled robots (without human supervision).
One of his clients who placed a short position on USD/CHF has included instructions to buy (short-covering) this pair if the movement reverses. The instruction was triggered at the level of 1.0070. However, when the client is informed that the instruction has been triggered, USD/CHF has fallen back to the level of 1.0020.
Repeated events like this indicate the magnitude of the influence of HFT (High-Frequency Trading) that utilizes algorithms (trading robots) in large financial institutions. For grassroots class traders, this could mean that we not only need to be aware of the schedule of the release of important news, but also the schedule of holidays of world financial centers such as Tokyo, London and New York.
