An ominous trend has developed among the top global economies in regards to industrial production. Great Britain initially published a report which showed industrial order expectations sinking rapidly for the month of April. Then the euro zone released its industrial new orders report on Wednesday, revealing slower growth than was expected, and coming alongside a sluggish core durable goods report from the United States.
This morning’s sharp downturn in Japanese industrial production, linked with those similar downturns in Great Britain, Europe and the United States, has now emerged and together paints a grim picture. On the currency side, the yen still suffers from its own economic concerns, but dollar bears outpaced the yen’s in this morning’s trading hours, helping to sink the USD/JPY temporarily despite Japan’s dire economic outlook. The pair also looks to be continuing this movement for the foreseeable future given the shift in sentiment away from the US dollar.
But the JPY did lose ground against almost all of its rivals yesterday partially as a result of the industrial downturn, but also as an S&P downgrade of Japan’s debt outlook from ‘stable’ to ‘negative’ caused a shift away from the island economy in the short- to mid-term.
The recent wave of industrial reports, revealing a global faltering among the industrial sector, may also be connected with recent GDP figures out of Britain and the United States. British Prelim GDP showed little movement, but remains at a dismal 0.5%. US Advance GDP, however, came out below expectations at 1.8%; pathetic when compared with Q4 2010 GDP, which published growth of 3.1%.
Being the first of three GDP reports from the US means the American economy still has time to lift this figure to an acceptable level. The downshift away from the greenback should help in the next few months by lifting exports. And this means traders should be able to profit from short dollar trades over the next few weeks, according to our analysts.
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Greg Holden is the Chief Market Analyst at ForexYard. Greg uses his detailed knowledge of fundamental and technical analysis to provide some of the leading market forecasts in the forex world today. A guest lecturer at forex symposiums and Chief Editor of ForexYard's analysis center, Greg brings highly detailed and easy-to-use market analyses to his clientele. He has been published on ForexYard's Trading Blog and affiliate websites. Greg holds degrees in Political Science and Economics from Missouri State University, as well as a Masters degree in Middle Eastern History.
