East Asia Econ – PPI and Import Price Trends
This combination of Prime Minister Takaichi’s policy goals, economic data, and uncertainty about a BoJ rate hike has pushed USD/JPY higher.
Traders may also question the lasting effectiveness of further yen intervention threats, given Takaichi’s support for ultra-loose policy and fiscal stimulus plans. Significantly, the third quarter GDP numbers call for both, fiscal stimulus and a more dovish BoJ Policy stance.
US Economic Data and the Fed Outlook
While Japanese data weighs on BoJ rate hike bets, US economic indicators and Fed speakers will influence US dollar demand later on Monday.
Economists expect the NY Empire State Manufacturing Index to drop from 10.7 in October to 6.1 in November. A larger-than-expected drop toward 0 could raise fears of a US recession, weighing on the US dollar. However, the numbers are unlikely to affect the Fed’s policy stance. US inflation and jobs data remain the Fed’s focal points as policymakers await delayed data following the US government reopening.
Meanwhile, hawkish Fed speeches may send USD/JPY higher during the US session. FOMC members Jefferson and Williams are due to speak. Rising Fed focus on inflation over jobs data could further temper bets on a December Fed rate cut. A less dovish Fed policy stance may send USD/JPY above the November 12 high of 155.044.
The key question remains whether concerns about elevated inflation override weaker labor market signals at the December FOMC meeting.
USD/JPY Scenarios: Diverging Monetary Policies
Bearish USD/JPY Scenario: Hawkish BoJ comments, intervention threats, weak US data, and dovish Fed rhetoric could drag USD/JPY toward 150.
Bullish USD/JPY Scenario: Dovish BoJ signals, strong US data, and hawkish Fed rhetoric could send USD/JPY toward 157.
AloJapan.com