Title: USD/JPY Stabilizes Above 148.00 as Mixed US PMI Data Refocuses Attention on Upcoming NFP Report
Source: FXStreet
Author: Ambar Warrick
The US dollar to Japanese yen currency pair (USD/JPY) remained steady above the 148.00 mark on Monday, as investors processed a mixed set of Purchasing Managers’ Index (PMI) data from the United States. Market attention has now shifted to the highly anticipated Nonfarm Payrolls (NFP) report due later this week, which is expected to provide more definitive guidance on the future direction of US monetary policy.
Economic indicators released at the start of the week offered a complex picture of the US economy. While manufacturing activity continued its decline in August, the services sector remained relatively robust. This divergence raised questions about underlying momentum in the broader economy and left some uncertainty regarding how the Federal Reserve will interpret the data moving forward.
Key takeaways:
– USD/JPY trades firmly above the 148.00 level in response to USD resilience
– Mixed US PMI data creates uncertainty over the path of interest rates
– Market focus turns to the upcoming US Nonfarm Payrolls report on Friday
– Japanese yen under pressure on safe-haven unwinding and dovish BOJ policy stance
– Technical indicators suggest bullish momentum remains intact for USD/JPY
US Dollar Holds Firm as Mixed PMI Data Keeps Policy Outlook Unclear
The greenback remained strong against the yen, supported by resilient US Treasury yields and an overall defensive market tone. The Institute for Supply Management (ISM) released its August PMI readings on Tuesday. These figures pointed to continued weakness in the manufacturing sector, while the services segment showed expansion, albeit at a slightly slower pace than expected.
Details of the US PMI reports:
– ISM Manufacturing PMI fell to 47.6 in August, below the forecast of 47.0 but still in contraction territory for the tenth consecutive month
– ISM Services PMI registered 52.6, compared to expectations of 52.8, continuing to expand but showing signs of cooling
– Prices Paid component rose to 48.4 from 42.6 in July, signaling a modest pickup in inflationary pressures within the manufacturing space
Following the release of these reports, the dollar briefly lost ground but quickly retraced those losses, reflecting persistent investor caution and focus on upcoming labor market indicators, particularly the August NFP report.
Why the NFP Report Matters for USD/JPY
Investors are closely watching Friday’s Nonfarm Payrolls data, with consensus estimates pointing to the addition of approximately 170,000 jobs in August. The labor market continues to be a key element in shaping monetary policy expectations, especially given the Federal Reserve’s dual mandate of price stability and maximum employment.
A strong job print would likely:
– Reinforce the case for holding interest rates higher for longer
– Support hawkish rhetoric from Fed Chair Jerome Powell and other policymakers
– Provide further upward pressure on Treasury yields, lending support to the USD
A weaker-than-expected NFP number, on the other hand, could tilt the Fed’s policy trajectory toward a more dovish stance and potentially lead to USD depreciation.
As of now, CME’s FedWatch Tool shows market pricing assigns around a 93% probability that the Federal Reserve will maintain current rates at its next policy meeting in September. However, they also price in around a 40% chance of another rate hike by the end of the year, a reflection of the mixed incoming data signals.
BOJ Policy and Yen Weakness Continue to Weigh on JPY
The Japanese yen remains on the back foot due to a combination of factors, particularly:
– Persistent dovish stance from the Bank of Japan (BOJ)
– Lack of clear intervention signals from Japanese authorities
– Continued outflows from Japanese assets in search of higher yields abroad
The BOJ thus far has remained committed to its ultra-loose monetary policy stance, with Governor Kazuo
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