USD/JPY – Japanese yen ticks higher at start of week

The Japanese yen has ticked lower in the Monday session. In North American trade, USD/JPY is trading at 110.57, up 0.09% on the day. On the release front, Japan’s current account surplus narrowed to JPY 1.85 billion, crushing the estimate of JPY 1.18 billion. On Tuesday, Japan releases machine tool reports and PPI, while the U.S publishes JOLT Jobs Openings.

U.S employment data was a mix on Friday, as job growth remained above the 200-thousand level, but wage growth faltered. Nonfarm payrolls dropped to 213 thousand, but this beat the estimate of 195 thousand. Average Hourly Earnings edged lower to 0.2%, shy of the estimate of 0.3%. There was a surprise as the unemployment rate climbed to 4.0%, above the forecast of 3.8%. The data demonstrates that the U.S labor market remains strong, and the economy continues to perform well. The markets remain bullish on U.S growth, despite uncertainty in Europe and elsewhere, as well as the growing threat of an all-out trade war between the U.S and China.

USD/JPY showed little response to the FOMC minutes, which were released on Thursday. The minutes were somewhat dovish in tone, as policymakers gave a thumbs-up to the strong U.S economy, but expressed concern about developments abroad. These include growing trade tensions with U.S trading partners, as well as political and economic developments in Europe. The minutes also reiterated the Fed’s support for a “gradual” raise in interest rates. The markets are circling the September policy meeting for the next rate hike, with the CME Group setting the odds of a quarter-point hike at 80%. Japan has been spared from tariffs by the Trump administration but is wary of the escalating trade war between the U.S and China, as the Japanese economy is heavily reliant on exports, and increasing protectionism could take a toll on the Japanese economy.

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