This week has seen a trend of dollar strengthening. The FOMC’s forecast of one rate cut this year and the BOJ’s postponement of bond purchase reduction have boosted USD/JPY. Additionally, political uncertainty in France has pressured the euro. The Swiss National Bank’s unexpected rate cut increased selling pressure on the Swiss franc. The Bank of England kept its policy rate unchanged, but the close vote hinted at a possible future rate cut.
USD/JPY has risen to near 159, potentially testing 160 again. The U.S. Treasury designated Japan as a “monitoring” target for currency manipulation but didn’t label it a manipulator. Treasury Secretary Yellen emphasized that currency intervention should be an emergency measure and stressed U.S.-Japan communication. Recent yen depreciation has been gradual, not sharp and speculative, as cautioned by Japan’s Finance Minister.
Upcoming economic indicators from Germany, France, the Eurozone, the UK, the U.S., and Canada are unlikely to change the dollar’s upward trend significantly. Key U.S. data includes June PMI, April retail sales, May industrial product prices, leading economic indicators, and existing home sales.
Today’s events include speeches by Bundesbank President Nagel and Lithuania’s central bank governor Simkus.
The U.S. Treasury has added Japan back to the currency “monitoring list,” making it unlikely that BOJ intervention will cap USD/JPY gains. The USD/JPY outlook remains bullish.
Expect USD movements following the PMI release. Keep an eye on the dollar’s trend.
