3 min to read
USDJPY Holds Steady in the Mid-141 Range as Major Events Approach
Sustaining Dollar Buying.
“USD/JPY Remains Firm in the Mid-141 Range Ahead of Key Events, Bolstering Dollar Demand”
Today, the USD/JPY faced a prevailing selling pressure, briefly dipping into the 140 range. Nevertheless, overall, the market continues to witness sustained demand for the US dollar, pushing the pair back to the mid-141 range during the New York trading session. Notably, last weekend, the Yomiuri Shimbun reported on the Bank of Japan’s discussions concerning the upper limit of long-term interest rates, leading to a weakening yen and allowing the USD/JPY to rebound to the upper 141 range. However, with pivotal events on the horizon this week, the upward momentum seems to have temporarily leveled off.
The prospect of significant upward revisions to inflation outlook in the Bank of Japan’s upcoming report could be contributing to the pause in yen selling. The bank is likely to revise its consumer price outlook (excluding fresh food) for the fiscal year 2023 from the previous 1.8% to around 2.5%, as reported by Bloomberg, indicating a more optimistic inflation projection. Nevertheless, uncertainties surrounding external economic factors and wage increases for the next year have constrained revisions for the fiscal years 2024 and 2025, expected to remain slightly adjusted at 2.0% and 1.6%, respectively. Consequently, achieving a sustainable and stable 2% inflation target remains uncertain.
In addition to the Bank of Japan’s meeting, the market eagerly anticipates the Federal Open Market Committee’s (FOMC) announcement on the 26th. A 0.25% rate hike is widely expected, with heightened attention on clues about future actions beyond September. Given that the Federal Reserve will have two months’ worth of data to review before the September FOMC, speculations suggest that the central bank may maintain a flexible stance until then.
Meanwhile, EUR/USD continues its downward trajectory, sliding to the mid-1.10 dollar range. The current 21-day moving average approaches 1.1030 dollars, serving as a crucial near-term support level. Today, the euro experienced intensified selling pressure as the July Eurozone PMI figures came in weaker than expected. Market projections for the European Central Bank’s policy decision during this week’s meeting indicate a likely 0.25% rate hike, but uncertainty surrounding September has escalated. The decision in September will be influenced by inflation figures for July and August, along with sentiment indicators.
Similar to the Federal Reserve, the European Central Bank is expected to maintain an open approach to their actions in September.
Furthermore, Pound Sterling to US Dollar (GBP/USD) continues its descent, briefly touching the 1.27 dollar range. As the pair falls below the 21-day moving average, market participants exercise caution regarding its future movement. Weaker-than-expected UK PMI flash readings for July drove accelerated selling pressure on the pound, pushing GBP/USD to a two-week low. Both the manufacturing sector and services industry underperformed, resulting in the composite index barely surpassing the critical level of 50, signaling a decline reminiscent of January levels.
These indicators signal a note of caution for the UK economy. Following this announcement, expectations for a significant interest rate hike at the Bank of England’s Monetary Policy Committee (MPC) meeting next week have further diminished. While a 0.25% rate hike is widely anticipated in the short-term financial market, the likelihood of a 0.50% rate hike has fallen to approximately 40%, down from about 75% a week ago.
Visit XM Official Website.
