USD/JPY Pair Faces Pressures Amidst Global Economic Data and Fed Anticipation
During the early Asian trading hours on Thursday, the USD/JPY pair continues to exhibit a defensive stance. The prominent currency pair is currently trading around 144.80, marking a 0.03% decline for the day. The US Dollar (USD) is experiencing a minor decrease, attributed to the retreat of US Treasury yields from their multi-year highs, dipping below 4.20%.
Yesterday, Japan’s industrial activity underwent its third consecutive contraction in August.
Preliminary data from Jibun Bank indicated that Japan’s manufacturing PMI for the same month inched up from 49.6 to 49.7. Although this figure was slightly below the anticipated 49.5, the Service PMI demonstrated a rise from 53.8 to 54.3 within the same period. Simultaneously, the initial readings of S&P PMI data from the US, UK, and Eurozone underscored concerns about a potential recession, prompting a surge in demand for the Japanese Yen, a traditional safe-haven asset.
The US Dollar (USD) is facing downward pressure after data revealed that US business activity in August expanded at a slower pace. The preliminary S&P Global Composite PMI declined to 50.4, dropping from the previous 52.0 and falling short of the market’s projection of 52.0. This marks the most significant decline since November 2022. S&P Global Manufacturing PMI also experienced a decline from 49 to 47 in the prior month, while Services PMI slipped from 52.4 to 51. Moreover, US annual New Home Sales surpassed expectations by reaching 714,000, a notable margin beyond the projected 705,000.
Earlier this week, Federal Reserve Bank (Fed) of Richmond President Thomas Barkin noted that if inflation persists at elevated levels, monetary policy adjustments would be necessary. The forthcoming Jackson Hole Symposium on Thursday will provide traders with insight into the outlook for interest rates, where hawkish comments from central bank policymakers could potentially dampen the Japanese Yen’s upside and bolster the USD/JPY pair. Notably, the divergence in monetary policy between the US and Japan remains a key factor influencing the weakening of the Yen.
Looking ahead, Thursday will see the release of US weekly Jobless Claims and Durable Goods Orders data. The Jackson Hole Symposium and, notably, Fed Chairman Jerome Powell’s speech on Friday, are events of great significance for traders. These events will play a pivotal role in shaping the trajectory of the USD/JPY pair.
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