The USD/JPY currency pair continues to show strength, trading at approximately 156.60 during the early hours of the Asian session on Friday. This marks the fifth consecutive day of gains for the pair, reaching its highest level since late July. One major factor driving this upward trend is the robust performance of the US Dollar, as traders prepare for the upcoming US Retail Sales data for October, expected later in the day.
In Japan, the preliminary figures for Gross Domestic Product (GDP) were released, indicating a 0.2% quarter-on-quarter increase for the third quarter, which was in line with expectations but noticeably lower than the previous quarter’s growth of 0.5%. On an annualized basis, Japanese GDP grew by 0.9%, surpassing market predictions of 0.7%, although it represents a significant slowdown from the 2.2% growth recorded in Q2. Following this announcement, the Japanese Yen displayed weakness as market participants reacted to the economic data.
The outlook for the Yen remains clouded by uncertainty regarding the Bank of Japan’s (BoJ) monetary policy. Governor Kazuo Ueda previously indicated that the central bank will closely monitor income statistics when considering future policy adjustments. This uncertainty is expected to continue to exert pressure on the Yen against the US Dollar. In contrast, verbal interventions from Japanese officials may provide some support to the currency in the short term.
On the US side, Federal Reserve Chair Jerome Powell emphasized the strength of the US economy, suggesting that there is no urgency for the Fed to make quick decisions regarding interest rate cuts. This stance has led traders to reassess their expectations for potential rate cuts at the Fed’s upcoming meeting in December, with the probability of a 25 basis points reduction falling from 75% to about 59.1%, according to recent market analysis. This shift has contributed to a strengthening of the US Dollar.
