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The Dallas Fed Manufacturing Raw Materials Payments Index for January was 37.1, down from 36 in the previous month.The Dallas Feds manufactured goods price index for January was 18.5, down from 8.2 in the previous month.The Dallas Fed Business Activity Index for January was -1.2, revised from -10.9 to -11.3 in the previous month.U.S. natural gas futures extended their gains, surging 20% to their highest level since December 2022. This surge was driven by news that U.S. natural gas production fell to its lowest level in two years due to wells freezing caused by a sharp drop in temperature.U.S. stocks rose in early trading on Monday as investors weighed new trade and policy risks and a strong start to fourth-quarter corporate earnings. Mining companies Freeport-McMoRan and Newmont were among the best performers as precious metal prices surged. Tom Essaye, founder of Sevens Report, said, “Today’s focus includes the rising risk of a U.S. government shutdown and the threat of tariffs on Canada. Any news that increases the likelihood of a shutdown or that the tariff threat might be implemented will weigh on the market, while a de-escalation will help drive a rebound.” However, investors remain skeptical about the likelihood of Trump implementing the tariff threat. Deutsche Bank noted that equity positions are generally trending sideways, while autonomous positions continue to shift from large-cap growth and technology stocks to cyclical stocks. JPMorgan Chase pointed out that reports so far this earnings season show that growth outside the technology sector is expanding. The main event this week is the Federal Reserve’s interest rate decision, with the market widely expecting no change.

Even as the BoJ vs. Fed Difference Remains in the Spotlight, USD/JPY Tracks Below 134.00 on Lackluster Yields

Alina Haynes

Apr 17, 2023 14:02

USD:JPY.png 

 

As Monday begins in Tokyo, USD/JPY falls from its intraday high and stabilizes around 133.80. As a consequence, the Yen pair is unable to extend its previous day's gains due to lax market conditions preceding this week's key data/events. In addition to a paucity of significant data or events, USD/JPY traders have recently struggled with inconsistent triggers and sluggish returns.

 

The previous day, USD/JPY reached its highest level in a week as primarily positive US data dampened expectations for a policy shift and rate cut by the Federal Reserve (Fed) in 2023. Despite this, US retail sales decreased by 1.0% in March compared to the predicted -0.4% decline and February's -0.2% decline. As opposed to the 0.2% market consensus and previous reading, Industrial Production increased by 0.4% in the month in question. The preliminary result of the University of Michigan's (UoM) Consumer Confidence Index for April, which increased to 63.5 from 62.0 analysts' expectations and previous readings, was also encouraging. In addition, inflation forecasts for the next year increased from 3.6% in March to 4.6% in April, while inflation forecasts for the next five years decreased by 2.9% during the same month.

 

Previously, the USD/JPY pair increased due to hawkish Fed discussions. In an interview with Reuters on Friday, Raphael Bostic, president of the Atlanta Federal Reserve (Fed), stated that "recent developments are consistent with one more rate hike." According to Reuters, Fed Governor Christopher Waller discussed this topic and stated that additional rate hikes are necessary because the Fed has not made significant progress toward its inflation objective. In an interview with CNBC on Friday, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated that he still needs to examine the statistics. The lawmaker said, "However, let's keep in mind that we've raised a lot of money; some of the delay may be reflected in today's retail sales number."

 

In contrast, the USD/JPY pair was able to maintain its strength due to the new Governor of the Bank of Japan (BoJ), Kazuo Ueda, who supports the Japanese central bank's easy-money policy.

 

Recent geopolitical tensions between China and the United States over Taiwan, as well as China's desire to collaborate with Russia to enhance regional and global security, have weighed on the USD/JPY pair and agitated the market.

 

S&P 500 Futures struggle to find a clear direction amidst these wagers following Wall Street's pessimistic close, as bond yields remain neutral despite weekly gains.

 

The preliminary readings of the US PMIs for April and the Japanese National Consumer Price Index (CPI) for March will be crucial to monitor going forward. The previously mentioned risk factors and central banker comments are also significant.


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