Today’s trading session is likely to remain calm and dominated by risk-off sentiment as Asian shares continue to pullback from
three-month high while safe-haven Japanese yen continues to gain traction following Trump’s Friday comment on potential
rollback of Chinese tariffs while escalating tensions in Honk Kong and Iraq strengthens the trend. Meanwhile, Japan’s release of
disappointing surplus and machine orders data are not expected to change much, although it should support the case of further
easing packages from both the BoJ and Japanese authorities in the near future.

In September, month-on-month machine orders reached -2.90% (prior: -2.40%; consensus: 0.90%), the third consecutive
deceleration, while the current account surplus in September reached JPY 1.61 trillion ($14.9 billion), with a trade balance of
JPY 1.1 billion and services surplus of JPY 40.10 billion (before: 23.26), strongly affected by the decline in exports caused by
current trade tensions. Risks of further headwinds is yet to be monitored for the Japanese economy as growing uncertainty
concerning the scale of upcoming US – China tariffs rollback and the underlying perspectives of a phase one deal could worsen the
situation for the export-reliant economy. In this context and unless the inflation outlook and global demand do not improve, the
Bank of Japan should implement further monetary easing, a topic more intensively discussed during its 31 October 2019 meeting.
Third quarter GDP data due on Thursday should confirm a stagnation with quarter-on-quarter data and year-on-year data expected
to mark along 0.20% and 0.90%. In current risk-off mood, JPY should stay on strong demand.

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