USD/JPY calm as GDP within expectations
The Japanese yen is calm on Monday. In the North American session, USD/JPY is trading at 156.91, up 0.09% on the day at the time of writing.
Japan’s GDP declines
Japan’s economy contracted in the first quarter with a weak reading of -1.8% y/y,
following a revised 0.4% gain in Q4 2023. This was slightly higher than the market
estimate of -1.9% and the initial estimate of -2.0%. On a quarterly basis, GDP declined
by 0.5%, in line with expectations. This followed a small gain of 0.1% in the fourth
quarter. The weak GDP data follows a soft household spending release last week, which
showed decline of 1.2% m/m in April.
The Bank of Japan meets on June 14th and is not expected to raise interest rates, after a
historic rate hike in March. This was the first rate hike since 2007 and a clear shift away
from the BoJ’s ultra-loose monetary policy. There is speculation that the BoJ might
discuss reducing its purchases of Japanese government bonds in an effort to unwind
monetary policy in order to shore up the ailing Japanese yen.
Strong US nonfarm payrolls boost US dollar
Friday’s US nonfarm payroll report was hotter than expected and provided a boost to the
US dollar against all the major currencies, including the yen. Nonfarm payrolls in May
rose to 272 thousand, blowing past the market estimate of 185,000 and much stronger
than the revised gain of 165 thousand in April. Wage growth accelerated in May and was
also higher than expected. Surprisingly, the unemployment rate crept up to 4%, up from
3.9% in April and above the market estimate of 3.9%.
The strong job numbers have helped cushion the impact on the economy of high rates and
that has kept inflation stubbornly high. According the CME’s MarketWatch, the odds of a
quarter-point cut in September have dropped to 46%, compared to 51% just one week
ago. There is virtually no chance of a rate cut at this week’s meeting, but investors will be
very interested in what the Fed has to say.
There is resistance at 157.52 and 158.28
156.33 and 155.57 are providing support
Japan’s GDP declines
Japan’s economy contracted in the first quarter with a weak reading of -1.8% y/y,
following a revised 0.4% gain in Q4 2023. This was slightly higher than the market
estimate of -1.9% and the initial estimate of -2.0%. On a quarterly basis, GDP declined
by 0.5%, in line with expectations. This followed a small gain of 0.1% in the fourth
quarter. The weak GDP data follows a soft household spending release last week, which
showed decline of 1.2% m/m in April.
The Bank of Japan meets on June 14th and is not expected to raise interest rates, after a
historic rate hike in March. This was the first rate hike since 2007 and a clear shift away
from the BoJ’s ultra-loose monetary policy. There is speculation that the BoJ might
discuss reducing its purchases of Japanese government bonds in an effort to unwind
monetary policy in order to shore up the ailing Japanese yen.
Strong US nonfarm payrolls boost US dollar
Friday’s US nonfarm payroll report was hotter than expected and provided a boost to the
US dollar against all the major currencies, including the yen. Nonfarm payrolls in May
rose to 272 thousand, blowing past the market estimate of 185,000 and much stronger
than the revised gain of 165 thousand in April. Wage growth accelerated in May and was
also higher than expected. Surprisingly, the unemployment rate crept up to 4%, up from
3.9% in April and above the market estimate of 3.9%.
The strong job numbers have helped cushion the impact on the economy of high rates and
that has kept inflation stubbornly high. According the CME’s MarketWatch, the odds of a
quarter-point cut in September have dropped to 46%, compared to 51% just one week
ago. There is virtually no chance of a rate cut at this week’s meeting, but investors will be
very interested in what the Fed has to say.
There is resistance at 157.52 and 158.28
156.33 and 155.57 are providing support
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