Japanese Yen gains against weaker US Dollar following softer Q2 GDP data

Japan’s Preliminary Q2 GDP grew 0.3% quarter-over-quarter, missing expectations of a 0.5% expansion.
Annualized GDP reached 1.1%, complicating the Bank of Japan's path toward further rate hikes.
US Retail Sales fell 0.6% in July, lowering market expectations for upcoming Fed rate hikes.

Akhtar Faruqui FXStreet

USD/JPY loses ground for the second successive day, trading around 159.10 during the Asian hours on Monday. The pair depreciates as the Japanese Yen JPY) remains stronger following the release of Japan’s preliminary Q2 Gross Domestic Product (GDP) data.

Japanese economy expanded 0.3% over the quarter in Q2 2026, following a 0.5% growth in Q1 and falling short of market expectations of 0.5%. On an annualized basis, Japan’s GDP grew 1.1%, compared with forecasts of 2.0% and the previous quarter’s 1.8% growth. A GDP print this far below expectations complicates the Bank of Japan's (BoJ) path toward further policy normalisation, given the central bank has been leaning on steady domestic demand to justify additional rate hikes after moving away from ultra-easy policy.

Yen steadies as Japan officials take comfort in recent gains

Strategists at Scotiabank note that the recent firming in JPY is easing some of the pressure on policymakers, with the “modest gains” in the currency “likely providing considerable reassurance to key officials at the Ministry of Finance, given ongoing concerns about the yen’s downward trajectory.”

Meanwhile, the USD/JPY pair depreciates as the US Dollar (USD) edges lower amid weaker-than-expected US economic data and shifting central bank expectations. Retail Sales in the United States fell by 0.6% month-over-month in July, following a 0.2% rise in June, coming in below the market consensus of 0.1% growth. On an annual basis, Retail Sales rose 5.0% in July compared to 6.8% in the previous month.

Consequently, traders have reduced their bets on Federal Reserve rate hikes following a slew of softer US data, including CPI, PPI, and Retail Sales. Markets are now pricing in a 33.1% chance of a rate hike next month, down from 44% last week according to the CME FedWatch tool.

Economic Indicator

Gross Domestic Product Annualized

The Gross Domestic Product (GDP), released by Japan’s Cabinet Office on a quarterly basis, is a measure of the total value of all goods and services produced in Japan during a given period. The GDP is considered as the main measure of Japan’s economic activity. The data is expressed at an annualized rate, which means that the rate has been adjusted to reflect the amount GDP would have changed over a year’s time, had it continued to grow at that specific rate. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

AUD/USD keeps range near 0.6950 after Australian trade data

AUD/USD consolidates near a two-month low, trading around mid-0.6900s in the Asian session on Thursday amid a bullish US Dollar. The US PCE data tempered October Fed hike bets, though oil-driven inflation fears remain supportive of elevated US bond yields. Meanwhile, Australia's trade surplus shrank sharply in August to AUD495M, having limited impact on the Aussie Dollar and the pair.

USD/JPY sits at weekly top above 158.00 as bullish USD counters intervention risks

USD/JPY is sitting at the top end of its weekly range above 158.00 in the Asian session on Thursday. Despite the softer US PCE data, oil-driven inflation risks keep US bond yields elevated near multi-year highs. Moreover, the US-Iran standoff benefits the safe-haven US Dollar and supports the pair. Broad US Dollar strength counters hawkish BoJ expectations and Japanese intervention risks.

Gold sticks to modest gains; remains below $4,200 as bullish USD limits upside

Gold attracts some dip-buyers near the $4,139 region during the Asian session, stalling the previous day's pullback from the $4,220 area, touched in reaction to softer-than-expected US inflation data. However, elevated US bond yields remain supportive of the prevailing strong bullish sentiment surrounding the US Dollar and should keep a lid on any meaningful appreciation for the non-yielding yellow metal.

Hyperliquid pares gains as ETF outflows cap tentative bullish recovery

Hyperliquid (HYPE) is down 2% at press time on Thursday, trimming its 5% gains from the previous day. Institutional demand is easing, with $5 million in outflows on Wednesday, weighing on near-term investors' sentiment. The technical outlook for HYPE indicates a near-term mixed tone as the price remains capped below $90.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025, but a fresh inflation shock in the Eurozone could give the Euro an unexpected lifeline. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025, but a fresh inflation shock in the Eurozone could give the Euro (EUR) an unexpected lifeline. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082.