USD/JPY approaches 148.00 on softer Japanese wages

The USD/JPY pair surges by 0.30%, moving closer to 147.70. In order to prevent the BoJ from being pressured to change course, the USD is declining and the DXY Index is consolidating after rising to a multi-month high of 105.15 after Japan released weak GDP and earnings data.

After Japan released weaker statistics during the Asian session, the USD/JPY rose on Friday towards 147.70, and the pair is expected to end the week with a 1% gain. While the USD is consolidating its weekly gains and retreating, the DXY index is still trading at multi-month highs.

On the data front, no relevant data will be released for either country for the rest of the session. On the US side, the focus is on next week’s Consumer Price Index (CPI) figures from August, which will be important for the Fed regarding the November and December decisions.

As for now, economic activity in the US has shown to remain resilient, driven by a strong Services sector, while the labour market, via the Nonfarm Payrolls, showed a mixed outlook, with job creation accelerating while wage inflation picked up in August.

It’s worth reminding readers that the Fed chairman Jerome Powell has stated that the bank expects the economy to cool down and that it will maintain its restrictive monetary policy as long as inflation does not back away.

The bets for a 25 basis point (bps) hike in November and December stand near 40%, and rate cuts are seen between June and July 2024.

On the JPY’s side, according to the Japanese Cabinet Office, the country’s Gross Domestic Product (GDP) growth for the second quarter was 1.2% on a quarterly basis, down from the previous reading of 1.5% and under expectations of 1.3%. The growth rate was 4.8% on an annual basis, down from 6% and below the market consensus of 5.5%. Last but not least, the Bank of Japan’s carefully monitored measure of Japanese labour cash earnings for July climbed by 1.3%, which was in line with predictions but less than the 2.3% observed in the previous reading.

The BoJ has been lately signaling that unless wage and inflation figures meet their forecasts, they will maintain their dovish stance and monetary policy divergences may continue acting as a tailwind for the pair.