The USD/JPY currency pair has managed to recover from a four-day losing streak, trading around 142.90 during the Asian trading session on Monday. This rebound is mainly influenced by disappointing Gross Domestic Product (GDP) figures released from Japan. Although the GDP growth was below market expectations, the overall economic landscape remains supportive of the Japanese Yen, especially given ongoing concerns about inflation.
Japanese GDP for the second quarter was reported to have expanded at an annualized rate of 2.9%, slightly lower than the initial estimate of 3.1% and below the market prediction of 3.2%. Nevertheless, this represents the strongest annual growth since the first quarter of 2023. On a quarter-on-quarter basis, Japan’s GDP grew by 0.7%, again missing the anticipated 0.8% but marking significant growth compared to the prior quarter. These figures suggest that while there is room for concern, the Japanese economy is still experiencing robust growth.
In the United States, the dollar gained traction following labor market data released last Friday, which has tempered expectations for a significant interest rate cut from the Federal Reserve in September. Current market analysis indicates that while a 25 basis point cut is expected during the upcoming meeting, the chances of a more aggressive 50 basis point cut have diminished slightly to 29%, down from 30% a week earlier.
The latest data from the U.S. Bureau of Labor Statistics showed Nonfarm Payrolls added 142,000 jobs in August, falling short of the predicted 160,000 yet improving over July’s downwardly revised figure of 89,000. Concurrently, the unemployment rate decreased to 4.2%, in line with expectations, down from 4.3% in the previous month. This mixed economic landscape adds complexity to future monetary policy decisions.
