Wednesday, September 3, 2014

USD/JPY

USD/JPY continues to lose ground on Wednesday, as the pair trades at the 105 line late in the European session. In the US, there are no major US events on the calendar. There are no Japanese releases on Wednesday, but the markets will be keeping a close eye on the Bank of Japan, as the central bank releases its monetary policy statement early Thursday.
Recent Japanese numbers have been steady, so the markets are not expecting any surprises from upcoming BOJ minutes. July’s inflation numbers were strong and met expectations, as taming deflation has become one of the government’s major economic success stories. Capital Spending hit 3.0% in August, well short of the forecast of 3.8%. Average Cash Earnings, which measures employment income, shot up 2.6% last month, crushing the estimate of 0.9%.
Despite the fact that recent Japanese data has been solid, the yen has been unable to hold its ground against the dollar, thanks to excellent US numbers. On Tuesday, ISM Manufacturing PMI impressed the markets, climbing to 59.0 points, its best showing since April 2011. The index easily beat the estimate of 57.0 points. The strong showing follows an unexpectedly strong GDP, which hit 4.2%. With the US economy moving forward at a fast clip, the US dollar has taken full advantage and has made broad gains this week against its major rivals.