USD/JPY drifts lower, nears 147.00 ahead of US GDP, Tokyo CPI data

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USD/JPY drifts lower, nears 147.00 ahead of US GDP, Tokyo CPI data

The US Dollar extends losses on Wednesday amid higher hopes of Fed easing.
Fed Williams opened the door to a rate cut in September and sent the US Dollar lower across the board.
Tokyo CPI numbers, due later today, and Friday's US PCE Prices Index will set the USD/JPY's near-term direction.

The US Dollar is extending its reversal from Wednesday’s highs above 148.00 to levels near the 147.00 round figure on Thursday, with the Greenback on its back foot ahead of the release of US Gross Domestic Product and Weekly Jobless Claims figures, due later today.

The US Dollar featured a knee-jerk reaction on Wednesday, following comments by New York Fed president, John Williams, at a CNBC interview, where the central banker fueled hopes of the Fed easing further.

Williams stated that interest rates are currently at restrictive levels and will likely decrease at some point. More interesting was his comment affirming that all Fed monetary policy meetings are “live” on rates, which was taken by the market as a hint to a September rate cut.

Tokyo CPI and US PCE Price Index in focus

On the macroeconomic front, the US Q2 GDP is expected to be revised up to 3.1% annualised growth, from the previous 3.0% estimation, while Jobless Claims are seen dropping to 230,000 from 235,000 last week.

In Japan, the focus will be on the August Tokyo CPI index, which will be analysed with special attention to assess the odds for the BoJ tightening in September, an option that is gaining ground after recent comments from Governor Ueda, warning about the inflationary trend in wages.

The highlight of the week, however, is Friday’s US PCE Prices Index release. The Fed’s favourite inflation indicators are expected to show that headline inflation remained steady, growing at a 2.6% yearly rate in July, while the core inflation accelerated to 2.9% last month, from 2.8% in June.

Economic Indicator

Gross Domestic Product Annualized

The real Gross Domestic Product (GDP) Annualized, released quarterly by the US Bureau of Economic Analysis, measures the value of the final goods and services produced in the United States in a given period of time. Changes in GDP are the most popular indicator of the nation’s overall economic health. The data is expressed at an annualized rate, which means that the rate has been adjusted to reflect the amount GDP would have changed over a year’s time, had it continued to grow at that specific rate. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Bureau of Economic Analysis (BEA) releases the Gross Domestic Product (GDP) growth on an annualized basis for each quarter. After publishing the first estimate, the BEA revises the data two more times, with the third release representing the final reading. Usually, the first estimate is the main market mover and a positive surprise is seen as a USD-positive development while a disappointing print is likely to weigh on the greenback. Market participants usually dismiss the second and third releases as they are generally not significant enough to meaningfully alter the growth picture.

Economic Indicator

Tokyo CPI ex Fresh Food (YoY)

The Tokyo Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households in the Tokyo region excluding fresh food, whose prices often fluctuate depending on the weather. The index is widely considered as a leading indicator of Japan’s overall CPI as it is published weeks before the nationwide reading. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.