USD/JPY dips below 147.50 with the Dollar weighed amid the risk-on mood

US Dollar's recovery against the yen has been halted at 147.80.
Weak US labour data and the US Government shutdown have hammered the US Dollar this week
The Focus today is on September's Final US Services PMIs and Fed Jefferson's speech.

Guillermo Alcala FXStreet

The US Dollar’s rebound against the Japanese Yen has lost momentum during Friday’s European Morning session, as the pair retreated from daily highs at the 147.80 area to levels around 147.30 at the moment of writing.

The pair rallied from two-week lows at 146.55 on late Thursday’s trading and Friday’s Asian session, as comments by DallasFed President Lorie Logan and BoJ Governor Kazuo Ueda dented the Yen-supportive monetary policy divergence.

Markets remain confident on further Fed cuts

On Thursday, the Dallas Fed president Lorie Logan affirmed that the bank needs to be “very cautious” with rate cuts, as inflation keeps trending higher and added that she is not eager to ease monetary policy further.

These comments provided some impetus to the US Dollar’s recovery, which was further underpinned by BoJ Governor Ueda, who warned about global uncertainty and left traders puzzled about the bank’s upcoming monetary policy decisions.

The pair, however, is losing momentum, with investors' hopes that the Fed will cut rates in October and December practically intact. The downbeat employment data seen this week, namely the unexpected decline in the ADP Employment Change, and the US Government shutdown, have endorsed those views.

Investors' focus is now on September’s US services activity figures, that is expected to show moderate growth, although the new orders and employment sub-indexes might muddle the impact of the headline reading. These figures are likely to provide a fresh context to Fed Vice Chair Philip Jefferson’s speech, due later today.

Economic Indicator

ISM Services PMI

The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector, which makes up most of the economy. The indicator is obtained from a survey of supply executives across the US based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that services sector activity is generally declining, which is seen as bearish for USD.

Why it matters to traders?

The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) reveals the current conditions in the US service sector, which has historically been a large GDP contributor. A print above 50 shows expansion in the service sector’s economic activity. Stronger-than-expected readings usually help the USD gather strength against its rivals. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are also watched closely by investors as they provide useful insights regarding the state of the labour market and inflation.

Economic Indicator

S&P Global Services PMI

The S&P Global Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for USD.

AUD/USD consolidates above 0.7000/two-month low; bearish potential intact

The AUD/USD pair oscillates in a narrow range during the Asian session, and moves little following the release of mixed inflation figures from China. Spot prices currently trade around the 0.7025 region, nearly unchanged for the day, and remain within striking distance of a nearly two-month low set on Tuesday. Renewed hostilities between the US and Iran temper hopes for a deal to end the over three-month-old war.

Japanese Yen languishes despite wholesale inflation accelerates in May

USD/JPY flatlines after experiencing volatility, trading around 160.40 during the Asian hours on Wednesday. The pair continues to hold its ground, reflecting a struggling Japanese Yen that has failed to find support despite a massive acceleration in wholesale inflation. Driven by surging energy costs linked to the ongoing Middle East conflict, Japan’s Producer Price Index jumped 6.3% year-over-year in May. This hot printing comfortably outpaced April’s upwardly revised 5.3% figure and surpassed market consensus of 5.5%, marking the fastest pace of wholesale price growth in three years.

Gold plummets below $4,200 amid US‑Iran tensions ahead of US CPI

Gold extends the recent breakdown momentum below a technically significant 200-day Simple Moving Average (SMA) and drops to a fresh low since March 23, further below the $4,200 mark during the Asian session. Crude Oil prices rise amid renewed hostilities between the US and Iran, fueling inflation fears and bolstering bets for more hawkish central banks.

Bitcoin remains vulnerable, Ethereum weakens further, XRP signals more downside

Bitcoin, Ethereum, and Ripple remain under pressure mid-week, as the broader cryptocurrency market struggles to regain recovery momentum after last week’s massive correction. BTC struggles below $62,000, ETH continues to weaken below $1,650, while XRP’s momentum indicators remain biased toward further downside.

US CPI data set to show inflation at three-year high in May, backing Fed hawkish tilt

The US Bureau of Labor Statistics will publish the May Consumer Price Index (CPI) data on Wednesday. The report is expected to show another step up in consumer inflation, driven by the persistently high Oil prices due to the ongoing crisis in the Middle East.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.