In the Asian session, the USDJPY pair gains momentum. And rallies to around the 143.00 level, up 0.57% on the day. As the US Dollar Index (DXY) launches a solid return early Monday. The key pair recovers some of Friday’s losses to a one-week low of 142.06.
On Friday, the Labor Department’s carefully awaited employment report revealed that the US economy created jobs. In June, the pace was slower than expected. Nonfarm Payrolls (NFP) in the United States increased by 209,000 in June, down from 306,000 in May. Furthermore, the unemployment rate fell from 3.7% to 3.6% in June, while average hourly earnings stayed steady at 0.4%, higher than the market projection of 0.3%.
Investors are digesting US labor statistics, assuming that the Federal Reserve (Fed) will not raise interest rates twice this year.
Following the lower US data, USDJPY fell sharply to a one-week low before solidly rebounding in Monday’s Asian session, mirroring the recovery in the US Dollar in line with the rates on US Treasury bonds.
According to US labor data, the Federal Reserve (Fed) may refrain from raising interest rates twice this year, as previously predicted.
Market participants, however, remain confident that the US Federal Reserve (Fed) will raise interest rates by 25 basis points (bps) at its July 25-26 meeting. according to the Fed Watch Tool from the CME Group. The odds are currently at 92.4%, up from 86.8% last week. This, in turn, promotes the continued rise in US Treasury bond rates, strengthening the US Dollar broadly.
According to Reuters, “the latest data from the Ministry of Finance showed on Monday that Japan’s current account surplus more than doubled year on year in May, the fourth consecutive month of gains, as the country’s trade deficit narrowed and income gains from overseas investment expanded,” from the Japanese docket.
According to a Reuters poll, the current account surplus totaled 1.86 trillion yen ($13.08 billion) in May, down from 773-billion-yen year on year and falling short of the median projection of 1.88 trillion yen.
The Japanese central bank’s potential FX intervention might limit the USDJPY rise
According to Reuters, the prospective FX intervention by the Japanese central bank may hold USD/JPY’s upside in check, as senior currency ambassador Masato Kanda stated that he was engaging with other countries, including the US, about currencies.
Later in the week, market players will pay close attention to the US Consumer Price Index (CPI), the Producer Price Index (PPI), and the US University of Michigan Preliminary Consumer Sentiment (July). Meanwhile, on Wednesday and Friday, the Japanese Producer Price Index (PPI) YoY and revised Industrial Production MoM will be released. Traders may opt to stay on the sidelines until the important data is announced.
