Onto Japan CPI, Jobs & NZ Figures

More US economic data points beat expectations on Thursday but the dollar was sluggish, we look at why. On the day the Australian dollar was the best performer while the euro lagged. Later, yen risks are heightened with a major slate of Japanese data is due.  

The parade of better US economic data continued with GDP but after an initial spike the dollar sagged. First let's look at the data.

GDP rose at a 4.2% annualized pace in the second reading on GDP. The initial reading was 4.0% and the consensus was 3.9%. The caveat to the report was that the market was expecting a higher reading after upward revisions in Tuesday's durable goods orders report.

Still, there was plenty of good news in the GDP data. It showed PCE inflation up 2.2% compared 2.0% expected and capex was revised to 8.4% from 5.5% initially.

Other numbers were also upbeat as pending home sales also rose 3.3% m/m compared to 0.5% expected and the initial jobless claims report was slightly better.

Surely the numbers make it marginally more likely that the Fed hikes rates sooner but here's why the dollar didn't climb. First, it's clear that the positive effects of good news on the US dollar are fading. That says that the 7-week run in USD is a bit tired. Second, the market is no longer satisfied with only good news, it wants a signal from the Fed. Third, we're at the end of the month and the market is thin ahead of a long weekend so profitable dollar longs are being pared.

Looking ahead, the yen is in focus with a major slate of data due. At 2330 GMT, the jobs and CPI reports are due. The CPI ex-food and energy is expected up 2.3% y/y. Twenty minutes later, retail sales for July are expected down 0.2%.

Since Kuroda said the job is only half done, there's a wave of renewed excitement about yen weakness. Poor numbers or low inflation could start to boost USD/JPY.