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July 3, Principal Asset Management strategist Sima Shah wrote that after todays non-farm report, she believes the Fed will not cut interest rates until the end of 2025. "Some Fed spokespersons have said they prefer to cut interest rates as early as this month. Todays data showed that employment was higher than expected, the unemployment rate fell, and initial jobless claims fell, which completely eliminated their reason for an imminent rate cut and suggested that the Fed has no urgency to provide supportive policies."On July 3, according to CMEs "Fed Watch": The probability of the Fed keeping interest rates unchanged in July is 93.3%, and the probability of a 25 basis point rate cut is 6.7%. The probability of the Fed keeping interest rates unchanged in September is 24%, the probability of a cumulative 25 basis point rate cut is 71%, and the probability of a cumulative 50 basis point rate cut is 5%. Before the release of the non-agricultural data, the probability of the Fed keeping interest rates unchanged in July was 76.7, and the probability of a 25 basis point rate cut was 23.3%. The probability of the Fed keeping interest rates unchanged in September is 4.9%, the probability of a cumulative 25 basis point rate cut is 73.3%, and the probability of a cumulative 50 basis point rate cut is 21.8%.July 3, data released on Thursday showed that hiring surged more than expected in June as companies coped with tariff uncertainty. The United States added 147,000 jobs in June and the unemployment rate fell to 4.1%, close to its historical low. In recent months, the main indicators of the economy have proved resilient, overcoming concerns about rising inflation and a possible economic downturn. Employment has maintained a solid pace and has been less disrupted than some economists expected. In June, the number of federal government jobs in the United States fell by 7,000, and the total number of federal government jobs has fallen by 69,000 since Trump established the Department of Government Efficiency in January. Employment in the manufacturing industry has hardly changed, and Trump has been trying to boost the manufacturing industry by imposing tariffs on foreign goods.Trumps rapid response team commented on non-farm payrolls: The US economy added 147,000 jobs in June, "far exceeding expectations", which is the fourth consecutive month that it has exceeded expectations. This is the "Trump effect!".Data showed that non-farm employment in the U.S. oil and gas extraction industry fell by about 500 in June from the previous month and by about 900 from the same period last year.

The USD/JPY has dropped from its monthly high above 137.00, as have yields, and the Japan PMI has been mostly ignored

Alina Haynes

Aug 23, 2022 14:59

 截屏2022-08-23 上午10.28.49.png

 

USD/JPY took offers to retest intraday low around 137.20 during the Asian session on Tuesday, extending the decline from a monthly high as market mood deteriorated amid conflicting signals and a cautious mindset ahead of the significant data/events. The yen pair has fallen for the first time in six days, despite the fact that recent economic figures from Japan have been disappointing.

 

Jibun Bank Manufacturing PMI in Japan dropped to 51.0 in August, down from 51.8 in July and 52.1 in June, according to preliminary data. The Jibun Bank Services PMI also fell, from 50.7 in the last poll and 50.7 as expected by the market, to 49.2.

 

With a decline of almost two basis points from its monthly high of 3.04% to its current level of 3.02%, the interest rate on the 10-year US Treasury note has fallen (bps).

 

The decline in benchmark US bond yields could be attributable to a lack of strong triggers and inconsistent rumors regarding the People's Bank of China (PBOC). Recent articles in China's Securities Times suggest that the PBOC may lower RRR this year to compensate for the end of the medium-term lending facility (MLF). The paper suggests that a reduction in reserve requirement ratios (RRR) could lead to reduced prime lending rates. Notably, this report comes from a government organization.

 

Some variables, such as Japan's propensity to print more money and the decision of Japanese exporters to book gains, may have contributed to the recent decline in the USD/JPY exchange rate. For the fiscal year commencing in April 2023, the Japanese Ministry of Finance would reportedly need $26.9 trillion yen ($195.5 billion), according to a report from Reuters on Tuesday.

 

In spite of this, projections of higher Fed rates and stronger US data, plus with geopolitical concerns over Russia and Ukraine, kept USD/JPY buyers bullish.

 

Today's agenda is ornamented with the preliminary readings of the US PMIs for August, as well as the US New Home Sales for July and the Richmond Fed Manufacturing Index for August. However, Fed Chair Jerome Powell's remarks at the Jackson Hole Symposium, which will be issued on Friday, will be key for establishing clear instructions.

 

The 137.50 to 55 zone is anticipated to act as support for USD/JPY bears seeking to achieve the low near 139.40 in July. Although buyers should be cautious as long as the price is trading above the 50-day moving average (135.57), the MACD and RSI are both trending upwards, indicating a possible price increase (14).


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