Overnight, USD/JPY fell to a low of 76.47 as US data continued to disappoint.

The 298,000 new homes sales fell short of the street consensus (310,000), whilst the median price of a home sold fell 6.3%, suggesting that housing remains a big headache for Mr Obama. The Richmond Fed Manufacturing Index fell to negative ten as well, continuing the trend of deteriorating regional manufacturing reports; one has to imagine the upcoming US ISM manufacturing will fall deep into contractionary territory. During early Asian trade, rating agency Moody’s lowered Japan’s credit rating from Aa2 to Aa3, suggesting the prospects for economic growth are weak, making it more difficult to achieve deficit reduction targets and implement new plans. The downgrade was also prompted by a large budget deficit and build up in government debt since the 2009 global recession.

The reaction in the JPY was relatively muted as most traders and economists would suggest this had been widely expected. Finance Minister Noda caused a sharp drop in the pair around 12:33, after unveiling a $100 billion emergency credit facility to help firms cope with JPY strength, whilst failing to mention intervention. An article in the Washington Post titled ‘Ben Bernanke unlikely to announce big new plans at Jackson Hole’ caused some selling of equities and saw the USD supported. However, we have argued for some time that the upcoming meeting will fail to see anything unconventional being announced from the Federal Reserve and that conditions as they stand just don’t warrant another round of asset purchase.