Japanese Labor Ministry Sabotages the Yen

One of the driving forces of the Forex market is the economic data that the world governments publish indicating how each of those countries is performing. This is some of the information that traders use to determine which way a currency pair may go or essentially which currency in the pair will become stronger or weaker relative to the other currency. Generally speaking, the reason that traders and investors look at government economic data at all is to try to determine what the given country’s central bank may do with short term interest rates; will they leave them where they are or will they increase or decrease them? What happens when you find out that the government data that you are relying on to help you to make your personal trading decisions are fake? This exact scenario played out last week when the Japanese labor ministry disclosed that they have been publishing erroneous statistics for years; of course, this raises doubts about the accuracy of any of the economic statistics that come out of Japan now. There are a few main pieces of data that this information impacts directly but indirectly it is estimated that as much as 40% of the economic data coming out of Japan is false. This of course directly impacts the value of the JPY and of course individual trader’s decisions around a JPY trade.

After the JPY’s very flat week last week against the EUR and the USD this week has been even more flat, both pairs have traded in a very tight trading range. Last week the GBP assaulted the JPY, and most other major currencies, but this week it too flattened out against the JPY trading in a comparatively tight range.

The US jobs report came out on Friday which was a little tricky to interpret. Wages have increased and the number of jobs increased but unemployment rose which looks odd at first. Though corporations in America expanded their payrolls and added jobs the Government shutdown put several hundred thousand people out of work for a time so the numbers do look a little odd. Government employees that will receive back pay are still counted as employed but government contractors will not get back pay and were considered unemployed. There won’t be enough information for several weeks to know with certainty what the real employment situation is in the US but economists have had a fear that the historic ten year extended expansion will end soon. Before the report was published the consensus among traders was that the USD would weaken against the EUR based upon the news and early on that’s exactly what happened but it bounced back quickly. This week the USD did lose some against the EUR, AUD, and CAD; it gained against the GBP and was about even with the JPY.

The never-ending Brexit situation is still plaguing the GBP which lost against the USD and EUR but it was about even with the JPY. This week the EUR was mixed gaining on a few of its trading partners and losing to some of the others. This week’s star may have been the CAD which gained against most other currencies while staying about even with AUD.