Japan’s second quarter GDP released this morning was at 1.9% YoY, smashing market consensus of 1.4% on the back of improved household spending and business investment.

On a quarter-on-quarter basis, the economy grew at annualised rate of 0.5%, beating street’s forecast of 0.2%. Likewise, the corporate good price index was also higher than what market expected.

The USD/JPY, however, was little moved this morning and Nikkei 225 Index is trading lower due to mounting concerns over escalating global trade tensions, which became a drag of Japan’s exports. Data shows that Japan’s exports minus imports subtracted 0.1 percent in the second quarter, missing expectations for a 0.1 percent growth. A negative US trading session last night also weighed on market sentiment.

The S&P 500 Index consolidated for a second day as the US equity market is facing selling pressure on both fundamental and technical point of view. As Beijing showed no sign of compromising at the trade talks, investors are trying to price in some of the potential impact to US corporates following strong rally in the earnings season. Technically, the S&P 500 index is hovering near the upper band of an ascending channel, which usually acts as a resistance. Momentum indicator RSI has reached an overbought zone of 70% and started to retrace, suggesting more consolidating in the days to come. The trend indicator SuperTrend (10,3) and 10-Day SMA, however, remains upward slope which indicates that the uptrend stays intact.

The US dollar is trading higher against its major peers ahead of an important inflation data on Friday night. Deteriorating geopolitical situations in Turkey and Russia have pushed dollar higher due to surging safety demand. Tonight’s US CPI data will serve as another key catalyst for the greenback as traders are eyeing on it for clues of future Fed policies. The inflation data has recorded five consecutive months of gain and this strong momentum reflected continued strength in the US economy. Higher readings tonight will likely support a stronger dollar whereas weaker readings will likely result in the opposite.

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