- USD/JPY continues to rise for a second consecutive day, fueled by strong USD performance.
- US GDP has been adjusted to a growth rate of 3.8% for the second quarter, while weekly unemployment claims dipped to 218,000.
- Attention will soon shift to the US Core PCE and Tokyo CPI data releases on Friday.
On Thursday, the Japanese Yen (JPY) weakened against the US Dollar (USD), allowing USD/JPY to reach its highest point in seven weeks. Currently, the pair is up approximately 149.75 percent, marking its second day of increase after a robust set of US economic reports bolstered the dollar.
The Bureau of Economic Analysis reported that the US gross domestic product (GDP) grew at an annual rate of 3.8% in the second quarter. Additionally, the core Personal Consumption Expenditures (PCE) price index, included in the GDP data, climbed 2.6%, slightly surpassing earlier estimates and market expectations of 2.5%.
For the week ending September 20th, first-time unemployment claims fell to 218,000. Orders for durable goods also performed impressively, with new orders increasing by 2.9% in August, a shift from the previous forecast of a 2.7% decline in July, which was revised down to a 1.5% forecast. Excluding defense, orders went up by 1.9%, recovering from a 2.5% drop the prior month.
This positive data stream is bolstering expectations that the Federal Reserve might tighten its monetary policy cautiously, reducing the outlook for aggressive rate cuts in the near term. According to the CME FedWatch tool, the market’s October interest rate pricing dropped to 85% following this release, a decline from about 94% prior to the data.
In Japan, the Bank of Japan (BOJ) published the minutes from its July 30-31 meeting on Thursday, where policymakers reaffirmed their overnight call rate target at around 0.5%, aligning with their plans from June. They also decided to gradually decrease their purchases of Japanese Government Bonds (JGBs). Some members pointed out that the Core Consumer Price Index (CPI) hovers around 3.0-3.5%, and there are concerns over service inflation driven by rising labor costs. A few policymakers even suggested that if price pressures persist, the bank may need to consider the timing of future rate hikes.
Looking ahead, market attention will turn to the upcoming release of the US Core PCE Price Index on Friday, which could provide new insights into the policy direction. In Japan, the September Tokyo CPI will also be released on Friday, where analysts will closely watch for indications of underlying inflation trends and the BOJ’s next policy moves.
