The greenback surged against the yen yesterday, despite the release of robust economic data from both Japan and the US. While Japan’s core machinery orders data for February was overwhelmingly positive, the US retail sales data for March blew away estimates. The US retail sales data enabled the market to make fresh bets on the greenback, pushing the USD/JPY pair to a multi-year high of 154.11 from 153.07 in the past 24 hours.
According to Japan’s Cabinet Office, the country’s core machinery orders, which do not include orders related to shipping and electric power firms, surged 7.70% m-o-m in February to ¥886.80 billion after declining 1.70% in the previous month and greater than forecasts of 0.80% growth. The data is regarded as a leading indicator of capital spending over the next six to nine months.
The reported figure reflects the steepest growth in core orders since January 2023.
The increase was led by a 9.40% rise in manufacturing and a 9.10% increase in manufacturing sectors to ¥386.30 billion and ¥505.90 billion, respectively.
Overall, the cumulative value of machinery orders grew by 2.10% m-o-m in February. On a y-o-y basis, core machinery orders fell by 1.80% in February, but it was shallower than the 6% decrease anticipated by economists.
According to the US Census Bureau, the country’s retail sales inched up 0.70% m-o-m in March to $709.60 billion, following a 0.70% increase in the previous month and blowing away forecasts of a 0.40% increase. The increase was led by a 2.10% rise in gas prices. Likewise, online sales grew by 2.70%.
On a y-o-y basis, US retail sales grew by 4% in March 2024.
The cumulative sales rose by 2.10% between January and March 2024, compared with a similar period last year.
Retail trade sales inched up 0.80% m-o-m in March. Non-store retailers recorded a jump of 11.30% y-o-y on March 24. Likewise, food services and drinking places posted growth of 6.50% y-o-y in March 2024.
Excluding auto sales, retail sales surged 1.10% m-o-m in March, following a 0.60% increase in the previous month and more than double the forecasts of 0.50% growth.
The Empire State Manufacturing Index improved to -14.30 in April from -20.90 in March but missed forecasts of -5.20. The negative reading indicates a continuing decline in manufacturing activity, as per the data published by the Federal Reserve Bank of New York.
The new orders index stood almost unchanged at -16.20 in April. However, the shipments index fell by eight points to -14.40, reflecting a continuing decline in both new orders and shipments.
Optimism about the business conditions remained subdued. The index for future business conditions decreased five points to 16.70 in April.
The robust US retail sales data and surge in Japan’s core machinery orders are expected to keep the USD/JPY pair range-bound in the near term.
The historical price chart indicates that the USD/JPY pair is rising after consolidating at 151.15. The stochastics indicator is also in the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the short term.
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