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Friday, February 27, 2026
What’s happening: The Japanese yen gained against the US dollar this morning as investors assessed the latest economic reports.
What happened: Retail sales in Japan climbed unexpectedly in January, while Tokyo’s core inflation eased to a 16-month low.
Bank of Japan Governor Kazuo Ueda said that the decision to hike interest rates will depend on economic reports.
Why it matters: Data released this morning showed Japan’s retail sales grew 1.8% year-over-year in January, recovering from a 0.9% decline in the previous month. The figure also topping market estimates of a 0.4% decline. The latest reading signalled the fastest growth in retail sales since June 2025, driven by the latest fiscal stimulus measures, including tax incentives to encourage household spending.
Core consumer prices in Tokyo rose 1.8% year-over-year in February, slowing from the 2% gain recorded in the previous month. This was the softest pace since October 2024. Inflation in Japan’s capital eased for the third month in a row, while it came in slightly higher than market estimates of 1.7%. Despite this, the latest reading came in below the Bank of Japan’s target of 2%.
Meanwhile, Japan’s industrial production climbed 2.2% in January, compared to a 0.1% decline in December. However, the figure missed elevated market expectations of 5.3% growth. The latest reading signalled the first yearly rise since October 2025, with manufacturers resuming production after year-end maintenance.
Bank of Japan Governor Kazuo Ueda said that the central bank will monitor economic reports at its March and April meetings to decide on interest rate hikes.
On Wednesday, US Trade Representative Jamieson Greer said that tariffs for some countries will be increased to 15% or more from the newly announced 10% rate. However, he refrained from naming any countries or providing further details.
Weakness in the US dollar also lent support to the Japanese yen this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped to 97.77.
The USD/JPY forex pair fell around 0.2% to 155.87 this morning. The Japanese currency had fallen to a two-week low of 156.82 versus the greenback on Wednesday.
What to watch: Investors will continue to gauge the outlook for tariffs, which is expected to provide direction to the Japanese yen ahead.
Data on S&P Global manufacturing PMI (0430 UAE Time) from Japan will be released on Monday. Analysts expect the S&P Global Japan manufacturing PMI to surge to 52.8 in February from 51.5 in the previous month, which would mark the strongest growth since May 2022.
Context: Crude oil prices fell this morning as investors continued monitoring talks between the US and Iran.
Details: The US and Iran will continue holding nuclear talks next week. Although Iran said that the latest negotiations in Geneva showed good progress, US officials reportedly left the talks disappointed.
Investors remain concerned around a major deployment of US military forces in the Middle East, after US President Donald Trump warned of military action in case both sides failed to reach a deal.
Data released on Thursday showed that US natural gas stockpiles fell 52 billion cubic feet (bcf) during the week ended February 20, more than market estimates of a 36 bcf decline, and compared to a drawdown of 252 bcf in the year-ago period.
Weakness in the US dollar lent support to oil prices, as a softer greenback makes commodities cheaper for foreign currency holders.
Spot prices for WTI crude oil fell around 0.6% to trade at $65.01 a barrel this morning, while Brent crude declined 0.6% to $70.55 a barrel.
In other energy trading, gasoline prices fell 0.1% to $2.2507, while heating oil jumped 0.7% to $2.5424 and natural gas prices gained around 0.1% to reach $2.830.
What to watch: Investors await the release of data on Baker Hughes oil rig count (2200 UAE Time) and Baker Hughes total rigs count (2200 UAE Time) from the US today. Crude oil rigs in the US remained at 409 in February 20 versus the previous week, while total rigs remained unchanged at 551.
The OPEC+ (Organization of the Petroleum Exporting Countries and its allies) meeting, scheduled for Sunday, will also remain in focus, with markets expecting a modest output rise for April.
Other Markets: European indices closed mostly higher on Thursday, with the FTSE 100, DAX 40 and CAC 40 up by 0.37%, 0.45% and 0.72%, respectively, and the STOXX Europe 600 Index down by 0.05%.
Ukraine’s President Volodymyr Zelenskyy said that the next round of US-brokered talks with Russia would be held in Abu Dhabi in early March. The news sent the USD/RUB pair higher in forex trading this morning.
Philippines’ trade deficit shrank to $4.0 billion in January from $4.9 billion in the year-ago period, exerting pressure on the USD/PHP forex pair.
UK’s car production contracted by 8.2% year-over-year to 65,249 units in January following a 10.1% decline in exports, which sent the GBP/USD pair lower in forex trading this morning.
Canada’s current account deficit shrank by C$4.6 billion to C$0.7 billion in the fourth quarter, which exerted pressure on the USD/CAD forex pair.
Singapore’s bank loans rose to a new record high of S$887.5 billion in January from S$886.1 billion in December. However, the USD/SGD pair rose in forex trading this morning.
Spain’s inflation rate (1200 UAE Time) and current account (1300 UAE Time), Germany’s unemployed persons (1255 UAE Time), unemployment change (1255 UAE Time), unemployment rate (1255 UAE Time) and inflation rate (1700 UAE Time), European Central Bank’s consumer inflation expectations (1300 UAE Time), Italy’s industrial sales (1300 UAE Time), India’s GDP growth rate (1430 UAE Time), government budget value (1430 UAE Time), bank loan growth (1530 UAE Time), deposit growth (1530 UAE Time) and foreign exchange reserves (1530 UAE Time), France’s unemployment benefit claims (1500 UAE Time) and jobseekers total (1500 UAE Time), Canada’s CFIB business barometer (1600 UAE Time), GDP growth rate (1730 UAE Time) and budget balance (2000 UAE Time), Mexico’s balance of trade (1600 UAE Time), US PPI (1730 UAE Time), Chicago PMI (1845 UAE Time) and construction spending (1900 UAE Time) as well as Russia’s industrial production (2000 UAE Time).
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