Japan is Officially in Recession; Risk Aversion Seen Intact

Daily Forex Fundamentals | Written by Finotec Group | Nov 17 08 12:16 GMT |

The dollar strengthens in the Asian and European opening on surprising data from Japan that officially went into recession. The economic outlook continued to worsen as Japan joined the euro zone in recession, while U.S. data showed a record fall in retail sales in October. Traders are seeing the greenback as a safe heaven and the gloomy economic data triggered some buys on the dollar. Nevertheless, the futures in the US were trading in positive territory while the EZ trade balance deficit surprisingly narrowed to 5.6B initiating back sales on the dollar that slipped to 1.27 vs. the Euro. The G20 meeting failed to come up with specific action to restore global market confidence the weekend. There's nothing we've had (from the G20) that changes people's view of the global economy or what the likely policy response is to it," said Daragh Maher, deputy head of global foreign exchange research at Calyon in London. "The strategy that people have had has been 'Play strong dollar, play strong yen, buy those on the dips and if it ain't broke don't fix it,'" he added The European share prices reflected the risk averse atmosphere with the leading indexes across the continent trading around 1.5% to 2% lose. Analysts said the current preference for unwinding riskier FX positions, favouring the low-yielding dollar and yen, would stay in focus as investors concentrated on prospects for a prolonged global recession. The main focus for today will be the data released from the US with the N.Y Fed manufacturing (13:30 GMT) and the industrial production (14:15 GMT). The NY Fed manufacturing is expected to show further decent in the economic activity whereas the industrial output might indicate a slight recovery from the previous decent. The data is expected to weight on the equity markets. Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Trading's Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.