USD/JPY breaks out as trade noise meets solid labor data
The US agreed to trade deal terms with Cambodia and Thailand, with details expected by the midnight deadline. Countries without deals will hear from the administration tonight. Mexico received a 90-day trade deal extension, maintaining current terms including 25% Fentanyl and car tariffs, plus 50% on steel, aluminum, and copper.
Brazil has an extra week to negotiate its 50% rate after Thursday’s tariff imposition. The 90-day Mexico extension suggests August 1 may not be the hard deadline initially indicated, making pre-positioning difficult for tariff outcomes.
FX markets largely corrected by NY close with the dollar remaining mostly higher. The DXY Index ended slightly above 100.00 ahead of Friday’s jobs report – the biggest market risk for USD and Treasuries into the weekend.
USD/JPY surpassed 150.00 after US data, rising to 150.80 by NY close.
US data confirmed Chair Powell’s Wednesday comments that inflation remains further from target than labor markets. Core PCE rose to 2.8% YoY from 2.7%, while the employment cost index accelerated in Q2. Initial and continuing jobless claims drifted lower, highlighting sound labor market conditions.
BoJ plays the waiting game as Ueda cools rate hike talk
Governor Kazuo Ueda sent a clear message: don’t expect rate moves until the numbers prove their worth. In his opening remarks and the Bank of Japan’s latest meeting summary, Ueda stressed that stronger forecasts must actually materialize before any shift in policy.
Although the BoJ now sees a brighter inflation outlook, Ueda emphasized the need to confirm whether the economy lives up to these projections. He maintained that inflation remains below 2% and growth is likely to stay modest. If momentum slows, he warned, underlying price pressures could ease as well.
On the currency side, USD/JPY pushed past the key 150.00 mark. The next key resistance will be 151.21. Conversely key support will be 21-day EMA of 147.85, where USD buyers may look to take advantage.
US jobs in focus
The US dollar’s recent strong run will remain in focus ahead of tonight’s US non-farm-payrolls.
US data has remained mostly positive this week with the ADP jobs number up 104k versus 77k expected while the weekly unemployment claims remained broadly steady at 217k.
Additionally, US June-quarter GDP beat expectations at 3.0% in annualised terms versus the 2.5% expected.
The US jobs report is forecast at 110k with the unemployment rate predicted to rise from 4.1% to 4.2% (source: Bloomberg).
The US jobs number is due at 10.30pm (AEST).
Antipodeans correct slightly due to Dollar strength
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 July – 2 August
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