The Euro to Japanese Yen (EUR/JPY) exchange rate was trending higher in Thursday’s European trading, while the Euro to Chinese Yuan (EUR/CNY) and Euro to Turkish Lira (EUR/TRY) exchange rates took a rather large tumble.
Japanese Manufacturing Contracts in Q2, Weighing on GDP Growth and Yen (JPY) Exchange Rate
The Japanese Yen was offered little support on Thursday after Japanese manufacturing activity declined in quarter two. The BSI Large Manufacturing Q-o-Q figure came in at -6.0 in Q2, following the previous quarter’s 2.4. However, some industry experts remain upbeat that Q3 will improve.
Additionally, the BSI Large All Industry quarter-on-quarter stat came in at -1.2 from the former 1.9.
Capital Economics industry expert Marcel Thieliant commented: ‘Core consumer spending fell to the lowest level since last summer in April, and industrial output may well have contracted this quarter. We therefore expect a sharp slowdown in GDP growth.’
BOJ Statements Suggest Yen (JPY) Safe from Further Large-Scale Losses
The Yen had recovered slightly on Wednesday after Bank of Japan (BOJ) Governor Haruhiko Kuroda commented that the Japanese currency was unlikely to fall any further given the large losses it’s suffered recently.
Kuroda stated: ‘The Yen is unlikely to weaken further in real effective terms if you think with common sense, given how far it has come.’
However, many industry experts were forecasting further Yen (JPY) exchange rate weakness if the BOJ introduce additional monetary policy stimulus to kick-start economic growth and help the central bank meet its 2.0% inflation target (despite how ambitious many economists believe it to be).
Chinese Yuan (CNY) Exchange Rate Supported by Industrial Production and Retail Sales Jumps
Meanwhile, the Chinese Yuan (CNY) was offered some support when Chinese ecostats printed favourably amid a backdrop of a large-scale economic slowdown. Chinese Industrial Production managed to increase from 5.9% to 6.1% in May on the year, rather than residing at 6.0% as forecast.
Chinese Retail Sales also registered growth when they increased to 10.1% on the year from the previous 10.0%.
The ecostats led some economists to question whether the worst of the country’s economic slowdown had passed.
Economist Loius Kuijs commented: ‘The figures are suggesting that perhaps the economic momentum has bottomed out. But they’re still not very strong and they don’t suggest any swift recovery in growth. This is especially true with regard to investment, which was actually a little disappointing.’
‘The bright part of the data continues to be the solid growth of consumption, where the fact that we still have a solid service sector means we still have good employment creation. That’s cushioning pressure in the industrial sphere.’
The weakening Yen (JPY) versus the US Dollar (USD) has caused some problems for China’s aluminium exports to Japan, despite a removal of export tax on the product.
One Tokyo trader stated: ‘The weak Yen has wiped out all business opportunities.’
Turkish Lira (TRY) Exchange Rate Jolted by General Election
Meanwhile, the Turkish Lira (TRY) exchange rate has had a sensitive few weeks with the hubbub of the Turkish general election.
Turkish President Racep Tayyip Erdogan has been the dominant force in Turkish politics with his Justice Development Party (AKP) since 2002 but failed to win the hearts and minds of so many citizens in his bid for more power. The AKP only won 258 of the 550 seats, after winning 327 in the 2011 election.
Many parties seem hesitant to form a coalition government with the AKP and many industry experts are suggesting an early election will occur.
Scholar at the Washington Institute Soner Cagaptay commented: ‘Never once in Turkish history has a coalition or minority government lasted its full mandate. All roads lead to an early election.’
Euro (EUR) Exchange Rate Forecast: EUR/JPY, EUR/CNY and EUR/TRY Forecast to Fluctuate on Greek Negotiations
The situation in Greece is likely to cause some major EUR/JPY, EUR/TRY and EUR/CNY fluctuations in the near future as creditors attempt to reach a deal with the nation before it runs out of money at the end of the month.
Wednesday saw financial heads such as German Chancellor Angela Merkel meet with Greek representatives in order to discuss the situation, which resulted with both sides agreeing to intensify efforts in order to reach a deal.
Merkel stated: ‘At the end of the talks there was absolute unanimity that Greece will work intensively and with high pressure with the three institutions in the coming days to solve all open issues.’
The Euro to Japanese Yen (EUR/JPY) exchange rate is trending in the region of 138.7000.
The Euro to Chinese Yuan (EUR/CNY) exchange rate is trending at 6.9910.
The Euro to Turkish Lira (EUR/TRY) exchange rate is trending in the region of 3.0605.