U.S. Presidential Debate Passed, Now Focus Shifts to U.S. CPI
In the Tokyo market, the yen is strengthening. Bank of Japan Policy Board member Nakagawa, seen as dovish, mentioned adjusting monetary easing, aligning with Governor Ueda’s stance on normalizing monetary policy. Additionally, reports suggest Harris held the upper hand in the highly anticipated Trump vs. Harris U.S. presidential debate, which has added selling pressure on the dollar, contradicting the usual Trump = strong dollar narrative. Moreover, factors such as the slowdown in the Chinese economy, falling crude oil prices, and selling pressure in cryptocurrencies are collectively boosting yen buying, with USD/JPY hitting a new year-to-date low near 140.71 yen.
Key Event:
The next major focus is the U.S. Consumer Price Index (CPI) for August, scheduled to be released at 9:30 PM Japan time. The market expects a slowdown, with forecasts at +2.5% year-on-year, down from the previous +2.9%, while core CPI is expected to remain at +3.2%, the same as the previous reading. If inflation shows the expected deceleration, it would provide further support for a rate cut at the September FOMC, likely prompting more dollar selling.
However, if yen appreciation and dollar weakness accelerate before the release, there could be a reversal on the grounds of profit-taking once the CPI is announced.
Speeches and Other Indicators:
No U.S. monetary officials are scheduled to speak today as they enter the blackout period. Other indicators include the MBA Mortgage Applications Index, Mexico’s Industrial Production Index, and U.S. Weekly Crude Oil Inventories. However, these are expected to have a limited impact on the dollar.
Strategy:
With increasing dollar-selling pressure due to Harris’s advantage, the focus is on the U.S. CPI release. If inflation falls more than expected, additional dollar selling could push USD/JPY below the 140 yen level.
