The USD/JPY pair remains stagnant below the crucial resistance level of 145.00 as investors await the US Personal Consumption Expenditure (PCE) inflation report for July. Global market sentiment seems to be focused on specific assets, with risk-sensitive currencies facing selling pressure while S&P 500 futures show gains in European trading hours. The US Dollar Index (DXY) continues its recovery above 101.20.
Market participants are closely watching the upcoming US PCE inflation data, which could impact market speculation on the Federal Reserve’s September policy meeting. The Fed is expected to normalize its policy in September, but there is uncertainty regarding the size of potential interest rate cuts. The likelihood of a 50 basis points rate reduction is at 34.5%, with the rest favoring a 25 bps cut.
Today’s session will also see revised estimates for Q2 Gross Domestic Product (GDP) and Initial Jobless Claims data for the week ending August 23. The jobless claims data will be crucial as the Fed is closely monitoring labor market conditions.
In Japan, expectations of more interest rate hikes by the Bank of Japan (BoJ) are supporting the Japanese Yen. BoJ Deputy Governor Ryozo Himino reaffirmed the bank’s commitment to adjust monetary easing based on economic activity and price projections.
Investors are also awaiting the Tokyo Consumer Price Index (CPI) data for August, which is expected to show steady growth in CPI excluding Fresh Food at 2.2%.
Analysis:
The USD/JPY pair is facing resistance below 145.00 as investors await key economic data releases in the US and Japan. The outcome of the US PCE inflation report and the Fed’s policy stance could determine the next move in the currency pair. Meanwhile, expectations of further interest rate hikes by the BoJ are supporting the Japanese Yen. This could lead to a potential shift in market sentiment and impact trading strategies for investors in the forex market.