USD/JPY Eyes Monthly-Low As US Producer Price Index (PPI) Disappoints

JAPANESE YEN TALKING POINTS

USD/JPY moves to the beat of its own drum in September, with the exchange rate pulling back ahead of the monthly-high (111.76), and dollar-yen may continue to consolidate ahead of the Federal Reserve interest rate decision on September 26 amid the mixed data prints coming out of the U.S. economy.

Image of daily change for major currencies

USD/JPY EYES MONTHLY-LOW AS US PRODUCER PRICE INDEX (PPI) DISAPPOINTS

Image of daily change for usdjpy

Updates to the U.S. Producer Price Index (PPI) showed the headline reading increasing 2.8% in August versus forecasts for a 3.2% print, and the lackluster development may push the Federal Open Market Committee (FOMC) to deliver a dovish rate-hike in September as ‘members agreed that the timing and size of future adjustments to the target range for the federal funds rate would depend on their assessments of realized and expected economic conditions relative to the Committee's objectives of maximum employment and 2 percent inflation’.

(Click on image to enlarge)

Image of Fed Fund Futures

Even though the FOMC appears to be on course to deliver four rate-hikes in 2018, the central bank may continue to tame expectations for an extended hiking-cycle as Chairman Jerome Powell sees a limited risk for above-target inflation, and Fed officials may continue to project a longer-run interest rate of 2.75% to 3.00% as ‘many participants commented on the fact that measures of aggregate nominal wage growth had so far picked up only modestly’.

In turn, the Consumer Price Index (CPI) on tap for tomorrow may foster a similar reaction as the PPI as the headline reading is expected to slow to 2.8% from 2.9% in July, and signs of waning price pressures may keep USD/JPY under pressure as it dampens bets for an extended hiking-cycle. With that said, dollar-yen may continue to consolidate over the remainder of the week, and the exchange rate stands at risk of facing range-bound conditions ahead of the Fed meeting as the recent rebound in the exchange rate fails to produce a test of the monthly-high (111.76).

1 2
View single page >> |

For more in-depth analysis, check out the Q3 Forecast for the Japanese ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.