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the USDJPY pair experienced a decline reaching the 138 yen level today
Market sentiment has favored selling pressure on the dollar.
“Amidst the ongoing dynamics of dollar selling, the USD/JPY pair experienced a decline, reaching the 138 yen level”
Market sentiment has favored selling pressure on the dollar, leading to this downward movement. Although there was a temporary surge of buying interest following the release of robust ADP employment data earlier in the day, the momentum quickly reversed, and selling pressure on the dollar resurfaced. Furthermore, the weak ISM Manufacturing Purchasing Managers’ Index (PMI) for the day has also contributed to the downward pressure on the dollar.
As we anticipate tomorrow’s release of US employment statistics, recent comments from members of the Federal Open Market Committee (FOMC) have significantly diminished expectations of any additional interest rate hikes this month. Additionally, the recent passing of the debt ceiling bill in the US House of Representatives has alleviated concerns regarding potential debt default, leading to an environment where the dollar is more susceptible to selling pressure. In the short-term financial markets, there is a probability exceeding 75% that the FOMC will maintain the current interest rates in this month’s meeting.
However, it is crucial to acknowledge that the outlook could shift depending on the strength of tomorrow’s US employment statistics. The ADP employment report for the day already exceeded expectations with a noteworthy increase of 278,000 jobs. Although the ADP report does not always perfectly align with the official nonfarm payroll data, a strong reading has the potential to significantly impact market sentiment.
Conversely, the euro exhibited some buying interest against the dollar, pushing it to the mid-1.07 dollar level. Despite the release of the preliminary May Harmonized Index of Consumer Prices (HICP) for the Eurozone, which indicated a significant decline in both the overall and core indices, the euro’s reaction remained relatively limited. The decrease in core inflation can partly be attributed to the introduction of a new flat-rate public transportation ticket (49 euro ticket) in Germany.
Market participants speculate that although inflation is expected to continue declining, core inflation may decrease only gradually due to the tight labor market conditions, prolonging the path towards achieving the 2% target. As a result, suggestions have emerged that the European Central Bank (ECB) will proceed with additional rate hikes of 0.25 percentage points in both June and July.
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