IND - Divergence Highlighted By Back-To-Back Quarterly Contractions In Japan And The U.K. But Little FX Reaction

2024-02-15 07:57:00 ET

Summary

• Japan's economy surprisingly contracted in Q4 '23, and the UK's economy contracted more than expected in Q4 '23, its second consecutive quarter without growth.
• The yen strengthened, and the dollar briefly traded below JPY150. The Australian dollar dipped but recovered.
• On the other hand, sterling is languishing and is the only G10 currency that is trading lower today in the European morning.
• Asia-Pacific equities were higher, with South Korea's Kospi being the main exception.
• Europe's STOXX 600 is up a little more than 0.5% to set a new high for the year. US index futures are trading firm.

Overview

There has been a string of disappointing economic news today. Japan's economy surprisingly contracted in Q4 '23, and the Q3 contraction was a little deeper than initially estimated. Australia's jobs growth was weaker than expected, and unemployment rose to 4.1%, matching the highest since November 2021. The UK's economy contracted more than expected in Q4 '23, its second consecutive quarter without growth. That seems like poor news ahead of today's two byelections. The reaction in the foreign exchange market is just as surprising as the data. The yen strengthened, and the dollar ( DXY , USDOLLAR ) briefly traded below JPY150. The Australian dollar dipped but recovered. On the other hand, sterling is languishing and is the only G10 currency that is trading lower today in the European morning. Emerging market currencies are more mixed. Most currencies in central Europe are lower, while the South African rand, a few Asian currencies, and the Mexican peso are a little firmer....

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