- USD/JPY recovers its intraday losses ahead of the release of US economic data.
- Chinese GDP exceeded expectations, which provided support for the Japanese Yen.
- Rising US Treasury yields offer support to the Dollar.
The USD/JPY pair halts a two-day winning streak, possibly due to encouraging economic data from China. The pair moves lower near 149.80 during the European session on Wednesday. However, USD/JPY is benefiting from encouraging United States (US) retail sales, driven by rising US Treasury yields.
Chinese Gross Domestic Product beat market consensus in the third quarter, reporting 1.3% growth versus 1.0% forecast. The annual report for the same quarter revealed a 4.9% increase, exceeding the 4.4% forecast.
Elsewhere, China’s retail sales rose 5.5% year-on-year, exceeding both the previous figure of 4.6% and the 4.9% forecast.
Japanese Finance Minister Shunichi Suzuki declined to comment on currency intervention following remarks by an International Monetary Fund (IMF) official on Tuesday. Suzuki stated that it was not necessary to delve into the specific factors influencing the currency.
Media reported on Tuesday that the Bank of Japan was considering revising its core Consumer Price Index (CPI) forecast for fiscal years 2023 and 2024, while maintaining its inflation forecast for 2025.
The dovish outlook, combined with generally optimistic risk sentiment, could continue to weaken the safe-haven Japanese Yen (JPY), indicating a higher likelihood of an uptrend for the USD/JPY pair.
Investors could see interventions by the Japanese authorities in the currency market aimed at strengthening its currency, which could put bearish pressure on the USD/JPY pair.
US retail sales beat expectations, rising 0.7% in September instead of the expected 0.3%. The control group of retail sales also recorded a significant increase of 0.6%, up from 0.2% previously. For its part, US industrial production improved 0.3%, defying expectations of stagnation at 0.0%.
The positive data from China could put slight pressure on the US Dollar Index (DXY), which is struggling to maintain intraday gains, hovering around 106.20 points. On a positive note, US Treasury yields improved, reaching 4.85% for the 10-year US Treasury bond, which could support the Dollar.
Markets are likely interested in the path of the Federal Reserve’s monetary policy, especially after the dovish comments from officials. Richmond Fed President Thomas Barkin suggested that current policy is already restrictive, expressing uncertainty about the next FOMC meeting in November. On the other hand, the president of the Minneapolis Federal Reserve, Neel Kashkari, stressed that inflation has persisted longer than expected, in line with the dovish stance of other Fed officials.
Investor attention is expected to focus on US housing data and speeches by Fed officials on Wednesday. Additionally, Friday’s Japanese inflation data, the national Consumer Price Index (CPI) for September excluding fresh food prices, is expected to show a year-on-year increase of 2.7%, down from the previous reading of 3.1 %.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
