This week has seen a notable trend of a stronger US dollar and weaker Japanese yen. Supported from both sides, USD/JPY has been gradually and steadily rising from the 143 yen level to the 145 yen level. Despite reaching the key level of 145 yen, which saw yen-buying intervention by the Japanese government last September, there hasn’t been a significant correction.
During the highly anticipated ECB Forum, the panel discussion featuring Haruhiko Kuroda, the Governor of the Bank of Japan, Jerome Powell, the Chair of the Federal Reserve, Christine Lagarde, the President of the European Central Bank, and Andrew Bailey, the Governor of the Bank of England, highlighted the contrasting monetary policy stances. Kuroda displayed a sense of humor and left an impression that the Bank of Japan’s stance on monetary easing remains unwavering.
Furthermore, the strength of a series of US economic indicators has exerted pressure for a stronger US dollar. Particularly in the latter half of the week, there has been an increase in USD buying. As USD/JPY rose, EUR/USD declined from the 1.09 level to the 1.08 level, and GBP/USD briefly dropped below the 1.26 level from the 1.27 level. Today, the stabilization of Tokyo’s consumer price growth has contributed to the speculation of prolonged easing by the Bank of Japan.
Today, a series of US economic indicators will be released, including Personal Income and Spending (May), PCE Deflator (May), Chicago Purchasing Managers’ Index (PMI) (June), and University of Michigan Consumer Sentiment Index (Final) (June). Of particular interest is the PCE Deflator, which is closely monitored by US financial authorities. Market expectations suggest a slowdown in growth from the previous +4.4% to around +3.8% on a year-on-year basis, while the Core PCE is expected to maintain a level of around +4.7%, similar to the previous reading. It is anticipated that persistent inflationary pressures will continue.
No notable speeches or events by financial authorities are scheduled for today. With the ECB Forum behind us, it seems that the market has already absorbed the latest information and news.
There will be a focus on the US PCE Deflator. If there are significant movements in the US dollar following this release, it will be important to follow the trend.