The euro rallied against the yen yesterday following the unexpectedly robust German retail sales data for September. The euro’s uptrend was also fueled by better-than-anticipated September 2022 quarterly GDP data. The sell-off of the yen was also encouraged by worse-than-expected Japanese industrial production data for September. Overall, the EUR/JPY pair rallied from a low of 146.60 to a high of 147.72 in the past 24 hours.
According to the Japanese Ministry of Economy, Trade, and Industry (METI), the country’s industrial production fell by 1.60% m-o-m in September, following an increase of 3.4% in the prior month, and worse than forecasts of a 0.80% decline.
Correspondingly, the production index stood at 98.60 in September. Likewise, the shipment index was 95.2, reflecting a 2.40% m-o-m decline in economic activity. Inventories rose by 3%, with the corresponding index rising to 103.90. The inventory ratio grew by 5.10 to 124.80.
In a separate news release, Japan’s METI stated that retail sales grew by 4.50% y-o-y in September, following a rise of 4.10% in the prior month, and this pleased economists who were expecting only a 4% growth in the reported period. The reported reading reflects the seventh successive month of increased retail trade and the steepest rate since May 2021, against the backdrop of a rebound in consumption that declined due to the pandemic.
General merchandise sales rose by 8.80% y-o-y in September, following a rise of 10.10% in August. Fuel retail sales grew by 7.10%, following growth of 10.80%. Medicine & toiletry items increased by 12.60%, following a rise of 13.10%.
Motor vehicle retail sales rebounded by 10.30% in September, following a decline of 6.30%. Also, machinery & equipment grew by 3.70% in September, following a contraction of 6.30%. On the contrary, fabric apparel & accessories recorded a dip of 3.6% in September, following a rise of 7.80%. Food and beverages posted a drop of 0.40%, following a decline of 0.10%.
On an m-o-m basis, retail trade grew by 1.10% in September, following a 1.30% (the steepest rate in five months) increase in August.
According to the Cabinet Office of Japan, the country’s consumer confidence index inched down to 29.90 in October, from 30.80 in September, and disappointed economists who were expecting an improvement in the consumer confidence index to 31. The reported figure is the lowest since August 2020. The overall livelihood index fell by 1.70 points (m-o-m) to 27.30 in October. The employment index fell by 1.10 points to 34.30. Inclination to buy declined 0.70 points to 22.50. Income growth fell by 0.10 points to 35.30.
According to the German statistical agency, Destatis, the country’s retail sales inched up 0.90% m-o-m in September, following a decline of 1.40% in August. Economists had forecast German retail sales to dip by 0.50% in September.
Grocery sales surged 2.60%m-o-m in September. Retail sales of food rose by 2.40%. Likewise, sales of clothing, textiles, leather, and shoes grew by 9.90%. On the contrary, petrol stations recorded a retail sales decline of 15.70%, reflecting the largest decline since 1994.
On a y-o-y basis, German retail sales fell by 0.90% in September 2022.
The Eurozone’s consumer price inflation surged to 10.70% y-o-y in October, from 9.90% in the prior month, as per the flash data posted by Eurostat. Economists did not anticipate any change in the annual inflation rate.
Energy grew by 41.90% in October, from 40.70% in September. Likewise, food, alcohol & tobacco posted a rise of 13.10%, compared with 11.80%. Non-energy industrial goods recorded a growth of 6% in October, following a 5.50% increase in the prior month. Services recorded an increase of 4.40%, compared with 4.30% in the earlier month.
Excluding energy, food, alcohol & tobacco, core consumer price inflation rose by 5% y-o-y in October, following an increase of 4.80% in the prior month. Economists had forecast the annual core inflation rate to remain unchanged.
According to the preliminary data published by Eurostat, the Eurozone’s economy expanded by 0.20% q-o-q in the September quarter, following a 0.80% growth in the prior quarter and twice the 0.10% increase anticipated by economists.
On a y-o-y basis, the Eurozone economy expanded by 2.10% in the September 2022 quarter.
The solid German retail sales data and the better-than-expected Eurozone GDP data are expected to keep the EUR/JPY pair range-bound with a slight bullish bias in the near term.
The historical price chart indicates that the EUR/JPY pair is rising after testing the support at 146.60. The next resistance is anticipated only near 148.45. Additionally, the currency pair is trading above its 50-day moving average while the stochastics indicator is in the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
