Skip to content USDJPY Fundamental Analysis – 19-August-2024
The Japanese yen has strengthened beyond the $146 (USD/JPY), reaching its highest point in nearly two weeks. This movement comes as the US dollar has shown signs of weakness due to growing expectations of a more cautious approach from the Federal Reserve regarding future interest rate hikes.
Recent remarks from Chicago Fed President Austan Goolsbee highlighted concerns within the US economy, pointing out that rising credit card delinquencies and weakening labor market indicators could be red flags for the economy.
Japanese Machinery Orders Exceed Expectations
Domestic data in Japan provided some positive news. Machinery orders, a key measure of business investment, showed a 2.1% month-on-month increase in June. This growth exceeded the expected 1.1% rise, suggesting that Japanese companies are more confident in expanding their capital investments.
The increase in machinery orders reflects a positive outlook for Japan’s industrial sector, which could contribute to sustained economic growth.
The Focus Turns to Japanese Inflation and the Bank of Japan Policy
Looking ahead, all eyes are now on Japan’s upcoming inflation data. Investors are eager to see how these figures might influence the Bank of Japan’s (BoJ) stance on monetary policy.
The BoJ has been cautious with its approach, and the upcoming data will be critical in determining whether it maintains its current path or considers adjustments. A higher-than-expected inflation rate could prompt discussions about tightening policies sooner than anticipated.
Japanese Economy Shows Strong Recovery in Q2
Recent economic data also revealed that Japan’s economy expanded by 0.8% quarter-on-quarter in the second quarter, a solid rebound from the 0.6% contraction in the first quarter. This growth exceeded the expected 0.5% rise, showing resilience despite global economic uncertainties.
The economy grew by 3.1% in Q2, an annual increase from the 2.3% decline in Q1 and surpassing the forecasted 2.1% growth rate.
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