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The USD/JPY Pair Maintains Modest Intraday Gains Just Below The Mid-140.00s As Attention Shifts To US GDP
During the Asian session, USD/JPY obtains some positive traction but lacks bullish conviction. The possibility of another Fed rate increase in September provides some support for the USD and the pair. Ahead of the Bank of Japan's decision on Friday, investors are looking to the US GDP for the second quarter to provide a fresh impetus.
The USD/JPY pair receives some purchasing interest during Thursday's Asian session, reversing a portion of the previous day's decline to the weekly low after the highly anticipated FOMC decision. Spot prices are currently trading just below the mid-140.00s, up 0.15 percent on the day, and the recent pullback from the vicinity of 142.00 seems to have halted for the time being.
As was widely anticipated, the Federal Reserve (Fed) increased interest rates by 25 basis points to a range of 5.25 percent to 5.50 percent, the highest level in 22 years, citing persistently high inflation. The Fed stated in the accompanying policy statement that the committee will continue to evaluate new information and its implications for monetary policy. Moreover, in his post-meeting press conference, Fed Chair Jerome Powell stated that the economy and labour market must continue to slow for inflation to credibly return to the 2% target, leaving the door open for another rate rise in September. This is expected to provide some support for the United States Dollar (USD) and operate as a tailwind for the USD/JPY pair.
In contrast, the Japanese Yen (JPY) is weakened by expectations that the Bank of Japan (BoJ) will maintain its easy-money policy. Governor Kazuo Ueda of the Bank of Japan reaffirmed on Wednesday that the central bank will maintain its accommodative monetary stance and that the long-term yield rate will remain constant under the yield curve control (YCC) policy. This, along with the underlying bullish sentiment across global equity markets, diminishes the JPY's relative safe-haven status and contributes to the USD/JPY pair's marginally bullish tone.
The dearth of bullish conviction in the intraday uptick necessitates caution before positioning for a further intraday appreciation move. Now, market participants anticipate a fresh impetus from the publication of the Advance US Q2 GDP print later in the early North American session. Thursday will see the publication of the usual Weekly Initial Jobless Claims, Durable Goods Orders, and Pending Home Sales data from the United States. On Friday, the focus will remain on the Bank of Japan's monetary policy update and the US Core PCE Price Index - the Fed's preferred inflation gauge.
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