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Eurozone Inflation Data Reassessed Upwards

According to data published today, Japan’s June balance of payments, without accounting for seasonal fluctuations, came out positive at 1.81 trillion yen against an expected 1.77 trillion yen. July’s positive balance of payments is the 13th in a row and the most significant for this month since 2010.

Although Japan has been stabilizing its trade deficit over the past few years, recent months have seen very strong positive balances of the current payment account due to high returns on foreign investments which is thanks to the yen being weaker; therefore making yen incomes higher. The weakening of the yen has also attracted tourists to Japan, facilitating a fall in the service trade deficit.

Japanese GDP from April to June fell by 1.2% YOY in comparison with the previous 3 months. This data confirmed a 3-quarter economic downturn. However it is less significant than was previously announced. A reassessment of the GDP data for the second quarter showed that weaker exports have slowed the country’s economic activeness. Japan is being affected by the Chinese economic situation, which is making things difficult for prime minister Abe in terms of reviving the economy. It was announced in August that April-June GDP was down by 1.6% YOY.

Business investment, a key element in “Abenomics,” fell in Q2 by 3.6% YOY, whilst it had earlier been announced that the value would see a fall by 0.3%. This is the first fall for 3 quarters where it shows that companies are still being careful about expanding their businesses in the country. The yen has lost part of its position on this data from today.

Chinese exportation in August fell by 5.5% YOY when expressed in dollars and the figure rises to 8.3% MOM. Chinese August imports fell by 13.8% YOY when expressed in dollars and 8.1% MOM. China’s positive August balance of trade increased to 60.2 billion USD from July’s 43.03 billion USD.

Weak trade data has become one of the signs that the economic situation in China is worsening. The industrial and manufacturing indicators, those for financial services, investment in property and the manufacturing sector indicate a slowing in China’s growth rate for the second half of this year. According to Capital Economics, August saw around 130 billion USD of capital flight from the country (July: 75 billion USD).

The main downer is still the oil market and Chinese problems heap the pressure on oil quotes. In addition, Chinese oil imports in August dropped 3.3% YOY. Oil exports from the country over August fell by 33% YOY.

A German positive balance of trade, taking into account a correction for seasonal fluctuations and the calendar effect, in July saw a 22.8 billion euro increase (reassessed from 22.1 billion euros in June). July’s indicator became the maximum since the value began to be calculated in 1991. It is expected that the positive balance would reach 22.3 billion euros. Exports with the correction were up 2.4% MOM in July, hitting 103.4 billion euros and this becoming the country’s biggest ever maximum in the history of the indicator’s calculation. External demand is supporting Europe’s largest economy. Imports in the same period grew by 2.2% to 80.6 billion euros.

France’s trade deficit in July rose to 3.3 billion euros after a fall in June to 2.8 billion euros. Exports to Asia and the Middle East declined sharply after the amount of aerial transportation of goods peaked in June, according to the government. A fall in the trade deficit in June was also a consequence of an increase in train and automobile exports.

Today some reassessed Eurozone GDP data was published in which Q2 GDP rose by 0.4% QOQ. It was previously believed that the value would be 0.3%. The value for Q1 was reassessed up from 0.4% to 0.5%. 2015 Q2 GDP has now increased 1.5% YOY, whilst the preliminary value was set at 1.2%.

A support for GDP growth in Q2 came from increased exports, a weakening of the euro since the middle of last year when the ECB implemented its latest cycle of its QE program. In addition, internal Eurozone demand in Q2 had slowed: consumer and investment expenditure was down QOQ by 0.5%, indicating a loss of trust from companies and consumers. Eurozone powers that be believe the stimulation of investment expenditure a priority in order to combat reduced growth for the zone’s economies.

The data and the outcomes of surveys for Q3 says a lot about Eurozone economies continuing to grow at the same rate as in the first half of 2015. Data published last week from a survey of managers showed that the economies of the region grew faster in August than in July.

The euro/dollar topped 1.1226 over the course of the day and fell below 1.1152.

The market is lying in wait for the Fed to convene on 16th and 17th September. Until then, it’s not worth expecting any real movements.

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