USD/JPY gains ground as dismal Japanese household spending data weighs on the yen, while Fed rate-hike expectations and geopolitical risks provide a floor for the US Dollar.
Japanese Household Spending collapsed 6.8% year-on-year in September, the 10th straight decline and the sharpest drop since September 2020, far worse than the -3.1% consensus, pushing the yen lower. A modest dollar uptick, Fed rate-hike odds above 80% for December and the geopolitical risk premium add support. Hawkish BoJ bets and intervention risk could cap the upside.
The yen weakened after Household Spending fell 6.8% YoY in September versus -3.1% expected, the sharpest drop since September 2020, complicating BoJ plans for further rate hikes. However, hawkish BoJ meeting opinions and intervention risks limit the downside.
A modest dollar uptick, over 80% FedWatch odds of a December rate hike and the unresolved US-Iran situation supporting safe-haven demand back the greenback. The next cue is the latest US consumer inflation figures.
The USD/JPY pair rebounded above the 158.00 level on Tuesday as the Japanese Yen weakened following a 6.8% year-on-year decline in September household spending. This sharp contraction, the largest since September 2020, complicates the Bank of Japan's path toward further interest rate hikes. Meanwhile, the US Dollar remains supported by an 80% market probability of a December Federal Reserve rate increase and ongoing geopolitical tensions regarding Iran.
The yen fell after Japan's Household Spending dropped 6.8% year-on-year in September, far worse than expected and the 10th consecutive monthly decline, while the dollar was supported by high odds of a December Fed rate hike.
Hawkish Bank of Japan expectations and intervention risks could limit yen losses, and traders are advised to wait for sustained strength above the mid-158.00s before aggressive bullish bets.
Japanese Household Spending fell 6.8% from a year earlier in September, the 10th straight monthly decline, which makes further Bank of Japan rate hikes harder and weighed on the currency.
Hawkish BoJ bets, with some policymakers calling for faster rate hikes as underlying inflation reached the 2% target, plus intervention risks, could limit yen losses.
Markets see an over 80% chance of another Fed rate hike in December, and the still-unresolved US-Iran conflict keeps safe-haven demand in place.
The latest US consumer inflation figures, which will provide more cues on the Fed's policy path.