USD/JPY starts off the week at high levels, as the pair trades at the 104 line in the European session on Monday. On the release front, the only US release is New Home Sales. The markets are expecting the key indicator to improve. In Japan, the sole event on the calendar is the Services Producer Price Index. The markets are expecting another strong reading for July.
Financial leaders and central bankers met at Jackson Point for a conference, and the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is a divergence in monetary stance between the ECB and the Fed, as the Fed is winding up QE, while the ECB may be forced to provide stimulus to the sagging Eurozone economy.
US releases wrapped up the week on a high note. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday's other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we've since September 2013. What is particularly encouraging is that the data stems from a wide range of sectors, which points to balanced economic growth.
The Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game regarding the timing of a rate hike will only intensify.
USD/JPY 104.03 H: 104.26 L: 103.86
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