USD/JPY retreats from the 152.50 area as the US Dollar loses steam

The US Dollar eases to levels near 153.00, on track for a 0.6% weekly loss
Softer-than-expected Japanese Household spending data added pressure on the Yen earlier on Friday.
The US Michigan Consumer Sentiment Index is expected to show further deterioration in November.

Guillermo Alcala FXStreet

The US Dollar is giving away previous gains on Friday, approaching weekly lows near 152.85, after being rejected at the 153.50 area earlier on the day. The pair remains looking for direction in choppy markets amid a risk-averse mood and with all eyes on the US Michigan Consumer Sentiment Index report.

The Yen depreciated during the Asian trading session, hit by softer than expected household spending data, which grew at a1.8% year-on-year pace in September, missing expectations of an acceleration to 2.5%, following August’s 2.3% increase.

These figures support Japanese PM Takaichi, who said earlier this week that the Japanese economy is only halfway through the path to achieve sustainable and stable price growth. These comments put the Bank of Japan’s plans to hike interest rates in December into question, and add pressure on the Yen

The pair is on track for a 0.6% weekly loss, weighed by mixed US employment data and some verbal interventions from Japanese Finance Minister Katayama, who warned about excessive currency volatility earlier in the week, as the Yen dropped to levels that triggered interventions in 2022 and 2024.

In the US, the comments of the Federal Reserve vice-chair Philip Jefferson will grab some attention after the downbeat jobs data seen on Thursday, although the highlight of the day is the Michigan Consumer Sentiment Index, which is expected to have deteriorated for the fourth consecutive month in November.

Economic Indicator

Michigan Consumer Sentiment Index

The Michigan Consumer Sentiment Index, released on a monthly basis by the University of Michigan, is a survey gauging sentiment among consumers in the United States. The questions cover three broad areas: personal finances, business conditions and buying conditions. The data shows a picture of whether or not consumers are willing to spend money, a key factor as consumer spending is a major driver of the US economy. The University of Michigan survey has proven to be an accurate indicator of the future course of the US economy. The survey publishes a preliminary, mid-month reading and a final print at the end of the month. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

Consumer exuberance can translate into greater spending and faster economic growth, implying a stronger labor market and a potential pick-up in inflation, helping turn the Fed hawkish. This survey’s popularity among analysts (mentioned more frequently than CB Consumer Confidence) is justified because the data here includes interviews conducted up to a day or two before the official release, making it a timely measure of consumer mood, but foremost because it gauges consumer attitudes on financial and income situations. Actual figures beating consensus tend to be USD bullish.

Economic Indicator

Michigan Consumer Expectations Index

The University of Michigan's Inflation Expectations gauge captures how much consumers anticipate prices will change over the coming 12 months. It comes out in two rounds—a preliminary release that tends to pack a bigger punch, followed by a revised update two weeks later.

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.