USDJPY is trading around 147.50, up 0.02% on the day.
The USDJPY pair is trading about 147.50, having retraced from 147.70 during early European trading hours on Friday. Meanwhile, the US Dollar Index (DXY) is trading around its best daily close since March near 105.30, bolstered by strong US economic data. Market participants will be watching the preliminary results of the University of Michigan (UoM) Consumer Confidence Survey before the Federal Open Market Committee (FOMC) meeting next week.
The positive US numbers released on Thursday show that the US economy remains resilient, with inflation rebounding in August.
Thursday wasAccording to the Bureau of Labor Statistics, the August Producer Price Index (PPI) increased 1.5% year on year, up from 0.8% in the previous report and above expectations. The yearly Core number has dropped from 2.4% to 2.2%. Meanwhile, retail sales increased by 0.6% month on month in August, above expectations of 0.2%. Furthermore, the US Department of Labor stated that weekly first jobless claims were 220,000, up from 217,000 the previous week, falling short of the market estimate of 225,000. These results showed that the US economy is still strong, with inflation rebounding in August.
These numbers, however, had no substantial impact on the Federal Reserve’s (Fed) monetary policy expectations. Markets expect the Fed to keep its interest rate unchanged at its meeting next week. Meanwhile, the Fed’s aggressive posture remains unchanged. For the time being, US bond rates and the USD are in favor of USDJPY.
The Bank of Japan stated that a pivot would not be contemplated if wage and inflation statistics did not meet its expectations.
A policymaker at the Bank of Japan (BoJ) indicated that an exit from ultra-easy policy will not be contemplated as long as wage and inflation statistics do not match expectations, making the USDJPY vulnerable versus its rivals.
On Thursday, Japan’s Machinery Orders plummeted 13% in July, compared to -5.8% the previous month. Monthly, the number fell 1.1% after rising 2.7% in June. Both results were lower than expected by the market. Despite the BoJ’s dovish tone, the poor data failed to raise the Japanese Yen (USDJPY).
Market players will be watching for the publication of the Empire State Manufacturing Index, Industrial Production, and the University of Michigan Consumer Sentiment Index in the United States. Confidence poll. These numbers may provide suggestions regarding the Federal Reserve’s (Fed) peak interest rate for the rest of the year ahead of the Fed meeting next week.
