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USD/JPY Declines Towards 145.00 As Optimistic Japanese Data Join The US Dollar's Retreat Ahead of Retail Sales
The USD/JPY falls for the first time in seven days, reversing from the year-to-date high and experiencing recent pressure near intraday lows. Positive Japanese GDP for the second quarter and Industrial Production for June, along with yields at multi-day highs, entice Yen pair sellers. The USD/JPY retreated from its yearly high due to cautious optimism in the market and consolidation ahead of US Retail Sales.
USD/JPY adheres to modest losses near 145.50-45 ahead of Tuesday's European session, marking the first daily loss in seven days. In doing so, the Yen pair draws cues from the positive Japanese statistics and the retreat of the US Dollar during a sluggish Asian trading session.
According to provisional readings of the Gross Domestic Product (GDP) figures for the second quarter (Q2) of 2023, Japan's economic growth came in at 1.5% QoQ, versus 0.8% expected and 0.7% previously. In addition, Japan's Industrial Production increases by 2.4% month-over-month in June, compared to 2.0% expected and prior.
Elsewhere, Japan's Economy Minister Shigeyuki Goto predicted a moderate economic recovery before calling attention to the danger of a global slowdown and the consequences of price increases.
Notably, the latest remarks from Japanese Finance Minister Shunichi Suzuki also hinted at the likelihood of another intervention from Tokyo and exerted downward pressure on the USD/JPY exchange rate. However, the policymaker ruled out the potential of targeting a specific price level when intervening and displayed a distaste for swift price movements.
In contrast, the US Dollar Index (DXY) retreats from its greatest level in five weeks, registering its first daily loss in four days at 103.05 as of press time, in response to negative inflation indicators. In spite of this, the New York Fed's inflation expectations for one year decreased to 3.5% in July, a drop of three percentage points and the lowest level since April 2021. However, the New York Fed survey also indicated optimism regarding the labour market and economic transition.
Aside from this, US 10-year Treasury bond yields fluctuated at the highest level since November 2022 the day before, reaching 4.20 percent at press time, which discourages USD/JPY purchasers from extending the previous day's advance.
It should be noted that the market's cautious optimism, as indicated by the marginally bid US and European stock futures, also nudges USD/JPY bulls.
Prior to Wednesday's release of the Minutes of the Federal Reserve's (Fed) most recent monetary policy meeting, the US Retail Sales for July, anticipated to be 0.4% MoM versus 0.2% previously, will be crucial for determining the intermediate direction of the USD/JPY. The movements of the bond market and the divergence between the Bank of Japan (BoJ) and the Federal Reserve will be crucial for establishing a distinct direction.
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