Wednesday, 25 October 2017

What’s next? – USDJPY 25.10.17

Posted by Valentine at 11:05 Labels:

The dollar exchanged at 113.92 against the Japanese yen in early hours on Wednesday, adding 0.03 percent as participants prepared for further economic reports later in the session.

The US dollar index, which gauges the greenback against six major rivals, was trading at 93.87 by the time of this writing, up 0.22 percent.

No relevant data was released in Asian hours. Ahead in the session, US durable goods orders for September are due for publishing as of 12:30 GMT, with a 1.0 percent gain seen.

New home sales for September are also scheduled for release at 14:00 GMT. Economists are forecasting a 0.9 percent reduction to a seasonally adjusted 555,000 units.

However, main attention remains on Friday’s US inflation report, which could affect expectations for further interest rate hikes this year.

According to Fed funds tracked by CME Group’s FedWatch tool, investors are currently pricing in more than a 90 percent chance of a rate hike by December.

Markit Economics released its US Manufacturing Purchasing Managers' Index on Tuesday, which came in at 54.5 for October, showing a positive development from a prior month 53.1 and coming above economist estimated reading of 53.5.

The Services PMI index rose to 55.9, also moving above expectations for a 55.6 reading in October. Services are growing steady, with staff hirings rising as well as business optimism.

The USDJPY is likely to remain supported by the differential between US Treasury bonds and Japanese government bonds. The spread is continuously widening as central banks from these two countries are moving in two very different directions.

While the Federal Reserve is looking closer to normalization of its monetary policy, the Bank of Japan insists on keeping monetary stimulus running, especially after PM Shinzo Abe’s victory.

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