Japanese yen appreciated after favourable Ecnomic report.

The Japanese yen (JPY) remained constant versus the US dollar (USD) following the release of July’s US Personal Consumption Expenditures (PCE) Index data, which caused traders to reduce their expectations of an aggressive Federal Reserve rate decrease in September.
According to the CME FedWatch Tool, markets fully expect the Fed to decrease interest rates by at least 25 basis points (bps) at its meeting in September. Traders expected to To acquire a better understanding of the possible size and pace of Fed rate decreases, watch the upcoming US employment numbers, notably the Nonfarm Payrolls (NFP) for August.

Japan Manufacturing PMI rose to 49.8 in August, up from 49.5 the previous month.

On Monday, Japanese corporations reported a 7.4% increase in capital spending in the second quarter. Furthermore, the country’s Manufacturing PMI for August was revised up to 49.8 from 49.5, reflecting a trend of stability. On Friday, an increase in Tokyo inflation bolstered the Bank of Japan (BoJ) hawkish monetary policy stance, supporting the JPY but limiting gains in the USDJPY pair.

Daily Market Movers: Japanese Yen rises owing to hawkish BoJ.

The US Bureau of Economic Analysis stated on Friday that the headline Personal Consumption Expenditures (PCE) Price Index climbed by 2.5% year on year in July. It matched the prior result of 2.5% but fell short of the expected 2.6%. Meanwhile, the core PCE, which includes volatile food and energy costs, increased by 2.6% year on year in July, in line with the previous result but somewhat lower than the consensus projection of 2.7%.

The latest US Personal Consumption Expenditures Index figures reduce the likelihood of an aggressive Fed rate drop in September.

Tokyo’s Consumer Price Index (CPI) rose to 2.6% year on year in August, from 2.2% in July. In August, core CPI increased by 1.6% year on year, up from 1.5% the prior month. Furthermore, Japan’s unemployment rate unexpectedly increased to 2.7% in July, exceeding both market expectations and June’s 2.5%, marking the highest jobless rate since August 2023.
Federal Reserve Atlanta President Raphael Bostic, a prominent hawk on the FOMC, stated last week that it might be “time to move”Rate cuts are predicted if inflation cools more and the jobless rate rises above expectations. FXStreet’s FedTracker, which uses a custom AI algorithm to assess the tone of Fed officials’ statements on a dovish-to-hawkish scale from 0 to 10, gave Kashkari’s words a neutral rating of 5.6.
The US GDP increased at an annualized rate of 3.0% in the second quarter, above both the predicted and prior growth rate of 2.8%. Furthermore, Initial Jobless Claims data revealed that the number of people filing for unemployment benefits declined to 231,000 for the week ending August 23, down from the previous 233,000 and somewhat lower than the projected 232,000.
Last week, Japan’s Finance Minister Shunichi Suzuki indicated that a range of factors influence foreign exchange prices. Factors such as monetary policy, interest rate differentials, geopolitical concerns, and market sentiment. Suzuki stated that it is difficult to foresee how these factors may affect foreign exchange rates.