The USD/JPY pair is trading higher around 145.35 in the early Asian session on Thursday, following the release of the Fed Minutes which suggested a potential rate cut by the US central bank in September. Japan’s Jibun Bank also reported positive Manufacturing and Services PMI data for August, contributing to the pair’s strength.
Looking ahead, market participants will closely monitor speeches by Bank of Japan Governor Kazuo Ueda and Fed Chair Jerome Powell at Jackson Hole on Friday, which could introduce volatility in the market.
The Fed’s minutes from the July meeting revealed a consensus among officials for a rate cut in September if inflation continues to cool. This expectation has already been priced in by the market, with a full percentage point worth of rate cuts anticipated by the end of the year. The prospect of a rate cut could weigh on the USD and limit the upside of USD/JPY in the short term.
Conversely, economists are anticipating a rate hike by the BoJ by the end of the year, with a median forecast of 0.50%. Traders will be attentive to Governor Ueda’s remarks on Friday, as any hawkish comments could strengthen the JPY against the USD.
Recent data released by Jibun Bank and S&P Global showed that Japan’s Manufacturing PMI rose to 49.5 in August, while Services PMI improved to 54.0, indicating positive momentum in the Japanese economy.
Analysis:
In summary, the USD/JPY pair is currently on an upward trend due to the potential for a rate cut by the Fed and positive economic data from Japan. Market volatility is expected to increase in the coming days, with speeches from central bank officials influencing the direction of the currency pair. Traders should monitor these events closely to make informed decisions regarding their investments.