Daily Market Analysis by Tom Williams 10/12/2013
Our goal today is to realize the market potential of the Japanese Yen due to its continuous weakening.
US Job Numbers Beat Out Expectations
It was reported on Friday December 6 2013 that the US economy succeeded in adding some 203,000 jobs to the workforce during the month of November 2013, breaking predictions expressed by many experts before the announcement. Moreover, the expanded level of job growth brought the US Unemployment rate down to 7%, the lowest level since 2008.
As was noted in the report here from Thursday, some experts believed that fewer jobs would be created during November than in October. Analysts note that these predictions likely stemmed from a drop that was seen during September 2013 before the numbers spiked back up in October, adding some 200,000 jobs to the economy. As such, these observers probably saw an evening out of the employment figures occurring over November, returning to the average numbers ranging between 180,000 - 190,000.
Analysts draw a number of conclusions from these reports. First, it would appear as if the American economy is growing at a consistent rate and is strong enough to support more workers joining the market. These employment figures help to back up the claim that the US is in fact making a recovery, perhaps preparing it for the removal of measures that were taken to support it during the recession. Chief among these in the minds of many investors is the $85 billion stimulus package that has been at the head of the discussion on the US monetary policy. As has been pointed to in past reports, the Federal Open Market Committee of the Federal Reserve has set out that lowering the unemployment rate is a key metric for them before they would be willing to make cuts to the quantitative easing measures. Investors have been eagerly awaiting a reduction of the stimulus, hoping that it will drive up the value of the USD in trading.
Should the economy continue to add jobs at a constant pace, thus lowering the unemployment rate, analysts believe that the FOMC may decide to begin moving away from the stimulus. However this will still be dependent on the Fed feeling confident that the economy is truly strong enough stand on its own.
In the meantime, traders can expect to see positive movement for the dollar in its trading against rival currency pairs in the coming days and weeks.
Sunday Reports Highlight Slacking Japanese Growth
According to reports on Sunday 8 December 2013, the Japanese economy is said to have suffered negative levels of growth. The report that was issued covered the Gross Domestic Product for the third quarter of 2013, including the annualized numbers. The figures presented in the report showed lower numbers than had been previously expected.
Analysts remind readers that the GDP is the combination of a country?s consumption, investments, government spending and the difference resulting from comparing exports and imports. As such, it provides economists a snapshot of how a country is progressing over a given period of time.
Analysts note that the Japanese government has been attempting to push the growth and inflation levels in recent months under the program Abenomics, so named for the Prime Minister Shinzo Abe. So far, the Yen has continued to struggle in trading.
Traders are advised to watch for further fluctuations for the Yen in its trading over the coming days.
New Zealand to Issue Rate Decision
The Reserve Bank of New Zealand is expected to announce their decision for their interest rates tomorrow Wednesday 11 December 2013. The new rate will cover the month of December 2013 and into January 2014. At this time, many experts believe that the monetary policy board is unlikely to make any changes to the current rate.
As noted above, any adjustments made to the interest rate can have a significant impact on the currency itself and on the economy. This rate is often used by central banks to control growth levels by influencing the desirability for borrowing money. As rates become lower, it becomes more attractive for consumers and companies to borrow money since it is cheaper. Should the bank see that inflation is moving out of its intended parameters, it can reign it in by raising rates.
Like many of its counterparts, the New Zealand Reserve Bank is known to act with a high level of transparency, making the probability of an unexpected change to the rates fairly low. That said, should a change in the rate occur, it would likely have a considerable impact on the value of the Kiwi in its trading against rival currencies.