The Japanese yen is stable on Wednesday, as USD/JPY trades just above the 107 line in the European session. The yen has rebounded strongly in the past week, gaining about 250 points against the US dollar. In economic news, Japanese Revised Industrial Production slumped in August, posting a decline of 1.9%. In the US, we’ll get a look at US releases after a quiet start to the week. There are three key events on the calendar – Retail Sales, Core Retail Sales and PPI.
US markets were off on Monday for a holiday, so there’s been little action on the release front so far this week. That could change later on Wednesday, as the US releases key consumer spending and inflation data. The markets are keeping low expectations, so traders should be prepared for some movement from the pair if there are some unexpected readings from Wednesday’s releases.
The US dollar has looked sharp recently, and pushed above the 110 line earlier this month. However, the impressive rally was interrupted by last week’s FOMC minutes, which were unexpectedly dovish. In the minutes, the Fed poured some cold water on rising expectations of a rate hike, as a number of policymakers said that the Federal Reserve should take a more data-dependent approach regarding a rate hike. The Fed also voiced concern about the rising strength of the US dollar which could weigh on the recovery. On the weekend, FOMC member Stanley Fischer said that the Fed could slow tightening if global growth is weaker than expected. Strong US numbers have raised expectations about a rate hike, but clearly the Fed is taking a cautious approach regarding the timing of a rate hike. Still, with QE set to wind up by the end of the month, rising speculation about higher rates bodes well for the US dollar.
USD/JPY 107.11 H: 107.49 L: 107.05
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