Soft employment figures last week prompted markets to raise the odds of a hard landing and price in a greater chance of a 50bp cut from the Federal Reverse in September.
However, the limited data we have seen thus far this week has leaned against that view.

ISM services was strong, the Atlanta Fed GDPNow model points towards robust growth for Q3, and now we have just seen the latest jobless claims data, which was marginally better than expected (233k vs the 240k estimate).
The latter also adds credence to the view that the recent soft data may be more hurricane/weather related.

As a result, USD/JPY is modestly higher, bouncing from 146 to 147 on the back of the jobless claims figures.
However, despite the reprieve in risk assets, market jitters remain, which should continue to lend support to the safe-haven yen.

What’s more, the Bank of Japan’s summary of opinions for the July meeting backed up Governor Kazou Ueda’s hawkish rhetoric.
Interestingly, one member said that the bank should raise rates to the neutral level of at least 1%.

In comparison to market pricing, the implied rate by the end of 2025 is at 0.46%.
This shows that there is room for markets to price in a market hawkish BoJ relative to current pricing, which can underpin the yen.

For more click on FXBUZ