The USD/JPY pair is holding onto gains near 154.00 despite a weak US Dollar. The lack of movement is due to thin trading volume in Monday’s session, with Japanese markets closed for Children’s Day. The US Dollar has been under pressure from poor Nonfarm Payrolls and weak Services PMI data, causing the US Dollar Index to fall slightly below 105.00. The market sentiment is currently risk-on, with expectations that the Federal Reserve will begin reducing interest rates from the September meeting.
The S&P 500 has opened on a bullish note, indicating a strong demand for risk-sensitive assets. 10-year US Treasury yields have also risen slightly to 4.50%, although they have decreased significantly due to the firm prospects of a Fed rate cut. Fed Governor Michelle Bowman stated that she would be open to raising interest rates further if progress in inflation declining to 2% stalls or reverses.
Investors are also keeping an eye on Japan’s potential intervention to support the Japanese Yen against the US Dollar. However, any intervention by Japan would only provide short-term support and not bring about any fundamental change in the Japanese Yen. Investors are waiting to see evidence that could instill confidence in a wage growth spiral in Japan.
Overall, the USD/JPY pair continues to trade sideways near 154.00, with the US Dollar struggling due to weak economic data. The market sentiment remains risk-on, with expectations of a Federal Reserve interest rate cut. Japan’s intervention to support the Yen may provide temporary relief, but investors are looking for evidence of sustained wage growth in Japan.
