On Monday, the Japanese yen started the week with sharp gains and USD/JPY traded at about 146.53, down 0.68% for the day in the North American session. The yen gained 1.6% before trimming most of those gains.
The financial markets are still closely attuned to the US economy’s health. The employment report for July was softer than expected, resulting in a global market meltdown as investors feared that the US economy was moving towards a recession fast. The markets managed to recover quickly as US data was well received last week.
Retail sales were much higher than expected with a 1% gain and US inflation was at 2.9%, nearly unchanged. UoM consumer sentiment on Friday improved and was stronger than expected, and inflation expectations were at 2.9%, unchanged and in line with expectations.
Although risk appetite has returned, and this boosted the equity markets, the US dollar has retreated against other major currencies and is 1.8% lower versus the yen since Friday.
The Federal Reserve is generally expected to implement an initial rate cut at September’s meeting. According to the CME’s FedWatch Tool, the chances are about 75/25 in favor of a 0.25% cut, due to solid US data last week.
