- USD/JPY is expected to approach nearly 147.20 during the early Asian session on Monday.
- Tokyo’s CPI inflation in Japan is set to decline in August.
- The US PCE stayed above the Fed’s target in July, yet traders remain optimistic about potential rate cuts.
The USD/JPY exchange rate is anticipated to settle around 147.20 at the beginning of the Asian markets on Monday. The easing inflation in Japan may lessen the likelihood of the Bank of Japan (BOJ) raising interest rates this year, which could weaken the Japanese yen (JPY) against the US dollar (USD). Traders are waiting for the US Purchasing Managers Index (PMI) report tied to the ISM Manufacturing, scheduled for Tuesday, before the release of the US Non-Farm Payroll (NFP) data.
In Japan, the Tokyo Consumer Price Index (CPI) indicated a moderate rise in inflation for August, with a 2.5% increase compared to July’s 2.9%. Additionally, the Tokyo CPI excluding fresh food also rose by 2.5%, a slower rate than the previous reading of 2.9%. This trend of slowing inflation may lead traders to rethink expectations for BOJ rate hikes.
As for the US, the Personal Consumption Expenditures (PCE) report from Friday demonstrated that inflation managed to stabilize in July, although it remains above the Federal Reserve’s target of 2%. This data could prompt traders to consider the possibility of the Fed cutting rates at the upcoming September meeting, which might put pressure on the US dollar against the yen.
Further insights are expected from the US employment figures to be released later Friday. The NFP report for August is anticipated to show around 78,000 new jobs created, but the unemployment rate might be fairly high at 4.3% during that period.
