Market Commentary:
This week saw a flurry of US economic data releases, including PPI, CPI, retail sales, and yesterday’s initial jobless claims, import prices, and industrial production figures. Slight deviations from expectations in PPI and CPI reinforced the scenario of easing inflation. This bolstered expectations for a September rate cut by the US FOMC, leading to a decline in US bond yields and a drop in the USD/JPY from the 156-yen range to the 153-yen range.
However, the dollar selling has since paused. Yesterday’s US economic data showed better-than-expected import and export prices, and a slight improvement in initial jobless claims, which had worsened previously. Cautious remarks on rate cuts from Richmond Fed President Barkin and Cleveland Fed President Mester also prompted some dollar buying. As a result, USD/JPY rebounded to nearly 156 yen in today’s Tokyo market.
Today, the primary US economic indicator to be released is the Leading Economic Index (April). The market has largely absorbed the recent US data, and upcoming releases from the Eurozone, Switzerland, Hong Kong, and Canada are unlikely to significantly impact the overall market.
Upcoming Economic Indicators:
- Eurozone CPI (final) for April
- Swiss Industrial Production Index (Q1 2024)
- Hong Kong Real GDP (final) for Q1 2024
- Canada International Securities Transactions (March)
Upcoming Speaking Events:
- Speeches and appearances from various central bank officials, including:
- ECB Vice President De Guindos
- Central Bank Governors from Slovenia, Croatia, Austria, and Latvia
- BOE Committee Member Mann
- FRB Governor Waller
- San Francisco Fed President Daly at the University of San Francisco commencement
Given the limited market-moving data expected, we should monitor price movements heading into the weekend.
Current Market View: While there has been a recovery in USD buying, it’s anticipated that profit-taking and end-of-week adjustments might lead to renewed USD selling. Accordingly, a short position in USD/JPY has been established.
