- The Japanese yen is expected to strengthen, potentially pushing USD/JPY below the significant level of 147.00.
- The US dollar faces pressure due to concerns regarding the Federal Reserve’s independence and uncertainties about its monetary policy outlook, compounded by unclear US GDP and employment data.
- Attention will turn to upcoming reports on PCE and Tokyo CPI, labor, and retail data on Friday.
On Thursday, the Japanese yen (JPY) gained ground against the US dollar (USD), driving USD/JPY below the 147.00 threshold as the greenback struggled. Concerns over the Federal Reserve’s independence and uncertainties stemming from Chairman Jerome Powell’s remarks at the Jackson Hole Symposium overshadowed the otherwise positive economic data from the US.
As of now, USD/JPY is around 146.85 during the US trading session, reflecting a decrease of approximately 0.40% for the day. This decline aligns with a broader slide in the US dollar, with the dollar index (DXY)—which gauges the greenback against a basket of six major currencies—down about 0.35%, hovering near 97.80.
The latest update on the US gross domestic product (GDP) for the quarter shows a stronger recovery than previously estimated, growing at an annual rate of 3.3%, up from the earlier figure of 3.0%. Also, the first weekly unemployment claims dropped to 229,000 in the last week, suggesting labor market stability, although continuing claims decreased to 1.95 million. A preliminary reading of the Personal Consumption Expenditures (PCE) price index released alongside the GDP was slightly downgraded to 2.0% for the second quarter, while the Core PCE remained unchanged at 2.5%, indicating ongoing underlying price pressures.
Market participants are now gearing up for the US PCE Inflation Report on Friday, as well as a packed economic docket from Japan. Expectations are that Tokyo’s headline CPI will decrease in August from 2.9% to 2.6% year-on-year. The CPI excluding fresh food is projected to drop from 2.9% to 2.5%, while the core CPI—excluding food and energy—may hold steady at 3.1%, reflecting persistent inflation. Moreover, Japan’s unemployment rate is anticipated to stay unchanged at 2.5% for July. Industrial output is expected to contract by 1.0% month-over-month, a reversal from a prior increase of 2.1%. Retail sales are predicted to rise by 1.8% year-on-year, down from 2.0%, with adjustments showing a previous 1.0% uptick in both seasonally adjusted and large retailer sales.
During its July meeting, the Bank of Japan (BOJ) opted to maintain interest rates, but it did boost its inflation forecasts and adopted a more optimistic view of the economy. This makes Friday’s data critical for short-term policy expectations. Future reports will play a vital role in shaping the direction of USD/JPY.
