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The USD/JPY once again briefly touched the mid-145 yen range
experiencing a slight declin.
“The USD/JPY once again briefly touched the mid-145 yen range, experiencing a slight decline”
In today’s New York foreign exchange market, the USD/JPY once again briefly touched the mid-145 yen range, experiencing a slight decline. This downturn was chiefly instigated by the release of key economic indicators, namely the ADP employment statistics and GDP revisions. These data points have reinforced the prevailing expectations of moderating inflation, thereby leading to a decrease in U.S. Treasury yields and a subsequent surge in selling pressure on the dollar.
The ADP employment statistics, in particular, were of great significance as they reported an increase in employment of 177,000, falling short of the consensus forecast and marking the smallest rise in five months. This shortfall in job growth signals a further softening in labor demand. Moreover, the previous day’s U.S. job openings also depicted a weakening labor market, highlighting an ongoing and gradual decline.
As the labor market edges closer to equilibrium in supply and demand, workers are gradually losing some of the bargaining power they had gained during the pandemic. This shift is accompanied by a deteriorating perception of the U.S. labor market, leading to a reduction in voluntary resignations. These dynamics, in turn, contribute to a deceleration in wage growth, with August wages for incumbent workers rising by only 5.9% year-on-year, marking the smallest increase since 2021. Conversely, wages for job switchers witnessed a more robust increase at 9.5%.
While the USD/JPY continues to receive support from the resilient U.S. personal consumption, it’s crucial to acknowledge the potential for a shift in market sentiment should labor market conditions deteriorate further. Consequently, all eyes are on the impending U.S. employment statistics scheduled for release on Friday. Presently, the nonfarm payroll (NFP) is expected to reveal an increase of 170,000 jobs, coupled with anticipations of slowing wage growth. Any results falling short of these expectations are poised to trigger a sensitive market response.
For those who have taken long positions above the 145-yen threshold, it’s imperative to take note of the significant level near the August 23rd low of 144.54 yen, which serves as a critical stop level. From a technical perspective, the 21-day moving average is converging around the 145-yen mark, garnering considerable attention.
In the realm of the EUR/USD, we witnessed a temporary rebound into the mid-1.09-dollar range. This week has seen a resurgence in the EUR/USD, supported by the 200-day moving average, and the currency pair has successfully reclaimed the 21-day moving average. Whether this resurgence signals the onset of a full-fledged rebound remains uncertain, contingent upon the dollar’s response to upcoming data releases, notably the U.S. PCE deflator and Friday’s employment statistics.
Today, we also received preliminary consumer price index figures for Germany and Spain. Notably, Germany’s inflation figures revealed less subdued results than initially expected, while conversely, Spain exhibited an acceleration in its inflation rate. These data points provide the European Central Bank (ECB) with valuable insights into the inflationary pressures within the Eurozone.
Looking ahead, tomorrow holds the release of the Eurozone’s comprehensive consumer price index. The data released today from Germany and Spain hint at the possibility of results exceeding expectations. ECB board members have consistently underscored the significance of consumer prices in shaping their decision, slated for September 14th.
Market sentiment regarding a potential rate hike in September remains divided due to prevailing uncertainties. Should consumer prices demonstrate a persistent upward trajectory, the ECB may be inclined to lean towards a rate hike.
In the GBP/USD pairing, we observed a resurgence in buying pressure, reclaiming the 1.27-dollar range. With the restoration of the 21-day moving average, market attention now shifts to forthcoming developments in the coming days. However, it’s worth noting that there are relatively few sterling-related events on the horizon, with the movement of the dollar in response to U.S. economic indicators poised to exert a predominant influence.
Today, the Bank of England released its Money and Credit report for July. The report reveals that savers have shifted £10.1 billion into fixed-rate accounts. Observers in the market have highlighted that savers are selecting accounts offering the highest available interest rates, anticipating that interest rates may be nearing their peak. Consequently, they are securing higher yields with funds they do not anticipate needing for the next one to two years.
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