What’s next? – USDJPY 31.10.17

The dollar exchanged at 113.07 against the yen in early trading hours on Tuesday, with the Japanese currency gaining on the back of better-than-expected economic data and as the greenback corrected downwards over concerns for the next Federal Reserve chair.

The US dollar index, which gauges the greenback against six major rivals, was trading unchanged at 94.45 by the time of this writing.

On Monday, the US dollar dropped as speculators are pointing at FOMC Governor Jerome Powell as the prefered candidate to replace Janet Yellen as Fed Chair next February.

Powell is seen as less hawkish than Yellen, which means the monetary policy normalization process could potentially face more delays in the future. However, if Trump’s tax reform receives a green light in the upcoming months, chances are the regulator will have to hike rates faster.

The Federal Reserve kicks off a new two-day monetary policy meeting later in the day. There are no expectations for changes, with rates seen at the current range of 1.00-1.25 percent.

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.

But the American currency found extra support on the personal consumption expenditures (PCE) price index, excluding food and energy, which rose 1.3 percent in the last twelve months.

In a separate report, the Commerce Department said Monday consumer spending increased by 1 percent last month, the biggest advance since August 2009.

Earlier today, industrial production in Japan notched down 1.1 percent in September, little less than a predicted 1.5 percent decline. Household spending rose 0.4 percent last month.

In other news, China’s manufacturing PMI for October came in at 51.6, against an estimated reading of 52. Its non-manufacturing PMI stood at 54.3, also short from a prior reading of 55.4.

Ahead in the day, investors will be monitoring the release of third-quarter unemployment cost index at 12:30 GMT and the S&P/Case-Shiller house price index half an hour later. The Conference Board will present its consumer confidence indicator for October at 14:00 GMT.

Fort Financial Services