It’s all about trade – How will Abenomics fair in the new world?

It’s all about trade – How will Abenomics fair in the new world?
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(February 10, 2017) Japan’s Prime Minister Abe’s visit to the White House today will be hotly debated ahead of the meet, with the markets certainly eager to get wind of how talks progressed, Abe looking to avoid the U.S administration imposing trade tariffs on Japanese car manufacturers in the months ahead, concerns over a possible trade war having gripped the markets in recent weeks.

Trade data out of Germany on Thursday showed that the trade surplus hit a record high for 2016, with both imports and exports rising by the largest amounts on record. The U.S president would have undoubtedly been aware of the latest figures out of Germany, Trump having accused the German government of taking advantage of the weakness in the EUR. The figures came out with the December surplus narrowing, which would have perhaps relieved some, though the devils was in the details.

To add salt to the wound, China’s trade data this morning also showed a material widening in December’s trade surplus, the markets all too aware of the U.S administration’s sentiment towards the weakness in the Yuan and the cost of goods exported, to the U.S in particular, with exports up 7.9% the only comfort being the fact that imports had risen by 16.7%, China’s imports from the U.S rising by 23.4%, with China’s trade surplus narrowing with the U.S

The surplus still sits above $20bn however and this is likely to be of irritation for Trump as he meets the first of the trio accused in recent weeks.

So, while sentiment ahead of today’s meeting improved in the early part of the day on Thursday, the latest string of trade figures out of the larger economies will make for an interesting session with the U.S president.

The Japanese economy has found little support from consumer spending, exports continuing to provide the necessary support and the outcome of today’s meeting will likely have a material bearing on the direction of the Japanese economy and beyond through the year.

While the Japanese Prime Minister will have prepared ahead of the meeting with some possible concessions on offer, to find common ground with the U.S administration, the markets have seen commodities and equities rally, this morning’s trade data supporting the uptick in risk appetite seen through Thursday, with the Dollar also continuing its recovery from recent losses, though the gains are not just down to market sentiment towards a trade war, the latest offering from the Oval Office being the news of an imminent tax plan for both businesses and individuals.

Economic data out of the U.S is on the lighter side this afternoon, giving the markets little else to focus on through the U.S session, though with Japan having more to fret over than just trade tariffs, the offering from the Japanese Prime Minister will likely be generous, the Prime Minister having to take into account Japan’s need for military support from the U.S. and even more so now as China continues to push its own agenda in the region.

The Dollar’s momentum is expected to continue through the day, the only deviation possibly coming from the release of today’s prelim Michigan Consumer Expectations and Sentiment figures for February, consumer confidence having eased recently on concerns over the U.S president’s policies.

At the time of the report, the Dollar Spot Index stands at 100.8, rising 0.15%, with the Yen down 0.32% against the Dollar, the markets yet to show concern ahead of today’s meeting.

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