The possibility of a zero interest rate differential between the US and Japan suggests a longer-term USD/JPY trend toward 100.
Japan Economic Calendar Pivotal for the Japanese Yen
As the BoJ takes a more hawkish policy stance, this week’s economic data may be crucial for the Japanese Yen.
On Friday, inflation, labor market, and retail sales figures will spotlight the BoJ and the Japanese Yen. Higher retail sales, a stable labor market, and rising inflation could signal a Q4 2024 BoJ rate hike.
Stable labor market conditions may drive wage growth, fueling household spending and demand-driven inflation. The BoJ could raise interest rates to support price stability.
Last week, the Statistics Bureau of Japan reported that Japan’s core inflation rate rose from 2.6% in June to 2.7% in July. On Monday, August 26, investors should monitor for reactions to Friday’s inflation numbers. Support for a Q4 2024 rate hike could send the USD/JPY below 143.500.
Expert Views on the USD/JPY and the BoJ Rate Path
Thomas Thornton, founder of Hedge Fund Telemetry, commented on USD/JPY trends, stating,
“USDJPY 144.18 is the level I am watching […]. Is anyone left with the carry trade still on? It could be another interesting Sunday night.”
Thornton also highlighted a ‘potential price objective of 133.36.’
Meanwhile, IMF Chief Economist Pierre-Olivier Gourinchas supported a more hawkish BoJ rate path, reportedly saying,
“Certainly in our assessment, there is scope for further normalization of monetary policy going forward, and policy rates to increase gradually for some time.”
US Economic Calendar: Key Indicators to Watch
Later in the Monday session, durable goods orders will draw investor interest.
Economists forecast durable goods orders will increase by 4.0% in July, after a 6.6% decline in June.
A rebound in orders could ease immediate fears of a hard landing, possibly reducing bets on a 50-basis point Fed rate cut.
