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May 17 - 09:55 AM

ANZ: Outlook on USD/JPY for the Upcoming Week

By eFXdata  —  May 17 - 08:58 AM

Synopsis:

ANZ assesses the Japanese Yen (JPY) against the US Dollar (USD), emphasizing the impact of a weaker USD and improved global risk sentiment on JPY. Despite domestic economic challenges, there are signs of emerging price pressures in Japan.

Key Points:

  • Economic Overview: Japan's Q1 GDP shows a contraction of 0.5% q/q, reflecting ongoing struggles in private consumption and business activity. March saw a 1.2% y/y decline in household spending.
  • Price Dynamics: The private consumption deflator increased to 3.7% y/y in Q1, indicating potential re-emergence of service-related price pressures.
  • Future Economic Indicators: Upcoming PMI data, especially service sector price gauges, are crucial and may show strengthening price pressures.
  • Monetary Policy Context: These data will help gauge the potential for economic recovery in Q2 and the likelihood of the Bank of Japan moving towards normalization of monetary policy.
  • Market Positioning: ANZ notes that USD/JPY movements below 152 may be premature, anticipating a more appropriate trading range of 152–157 given the current economic conditions.

Conclusion:

ANZ maintains a cautious but slightly optimistic outlook for the JPY in the near term, influenced by potential marginal weakening in US yields and the USD. The suggested USD/JPY trading range reflects current economic and financial dynamics.

Source:
ANZ Research/Market Commentary

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