Japanese GDP down but markets fail to react

Japan’s economy shrank by 3.0% in Q3 as a microchip shortage and covid disruption halted a lot of activity and brought annualised growth down to 3.0%. We also saw a drop of 7.3% in capacity utilisation and a 5.4% drop in industrial production. Whilst poor data was generally expected, the GBPJPY rate remained eerily flat around JPY 153, which is roughly where it stayed for the bulk of last week. I have to admit, I expected more market reaction than that.

China’s industrial production slows

Traders may have been distracted by a slowdown in China’s industrial production and retail sales. However, the data from China can be oddly mixed and this morning is no exception. The October 21 vs October 20 growth rate was up for both sets of data but the year-on-year rates were lower. Go figure, as they say somewhere to the West.

All this Far East activity has been largely ignored by the markets. The most obvious place to look for the impact of Chinese data is Asia and Australasia and nothing much has happened there. GBPAUD is just below AUD 1.83 and GBPNZD is still hovering around NZD 1.9050.

Sterling flat in quiet markets

Sterling has failed to react today to a 0.6% drop in the Rightmove House Price Index and Monday is the quietest day of the week for UK data. So we may see a day of consolidation from the Pound.

That has already started in the GBPEUR rate. That pair is as flat as Katy Price’s vowels. The range, if you can call it that, this morning has been between €1.1710 and €1.1730. As mentioned above, this is a day lacking in UK data but we will hear speeches by the heads of the Bundesbank and the European Central Bank. So we’ll wait to see if anything revelatory comes from that.

We will see manufacturing data from Canada this afternoon. The GBPCAD rate is in a narrowing pattern cantered on CAD 1.6825. The forecasts for this data are fairly positive, so we may see the bottom end of that pattern around CAD 1.68 tested this afternoon. If the Pound falls through there, CAD 1.6725 is the first obvious target. That’s where we uncovered GBP buyers on the last two dips.

The rest of Monday is light on data. There isn’t even any tier one data from the US but the rest of the week will be much more lively.

And it is International Clean Out Your Refrigerator Day. A day that could also be named, ‘Discover new life forms day’ or ‘I wondered where that went day’. Good luck with that one.

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