USD/JPY calm as GDP within expectations

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USD/JPY calm as GDP within expectations

The Japanese yen is calm on Monday. In the North American session, USD/JPY is trading at 156.91, up 0.09% on the day at the time of writing.

Japan's GDP declines

Japan's economy contracted in the first quarter with a weak reading of -1.8% y/y,

following a revised 0.4% gain in Q4 2023. This was slightly higher than the market

estimate of -1.9% and the initial estimate of -2.0%. On a quarterly basis, GDP declined

by 0.5%, in line with expectations. This followed a small gain of 0.1% in the fourth

quarter. The weak GDP data follows a soft household spending release last week, which

showed decline of 1.2% m/m in April.

The Bank of Japan meets on June 14th and is not expected to raise interest rates, after a

historic rate hike in March. This was the first rate hike since 2007 and a clear shift away

from the BoJ's ultra-loose monetary policy. There is speculation that the BoJ might

discuss reducing its purchases of Japanese government bonds in an effort to unwind

monetary policy in order to shore up the ailing Japanese yen.

Strong US nonfarm payrolls boost US dollar

Friday's US nonfarm payroll report was hotter than expected and provided a boost to the

US dollar against all the major currencies, including the yen. Nonfarm payrolls in May

rose to 272 thousand, blowing past the market estimate of 185,000 and much stronger

than the revised gain of 165 thousand in April. Wage growth accelerated in May and was

also higher than expected. Surprisingly, the unemployment rate crept up to 4%, up from

3.9% in April and above the market estimate of 3.9%.

The strong job numbers have helped cushion the impact on the economy of high rates and

that has kept inflation stubbornly high. According the CME's MarketWatch, the odds of a

quarter-point cut in September have dropped to 46%, compared to 51% just one week

ago. There is virtually no chance of a rate cut at this week's meeting, but investors will be

very interested in what the Fed has to say.

USD/JPY Technical

• There is resistance at 157.52 and 158.28


• 156.33 and 155.57 are providing support

Source: USD/JPY calm as GDP within expectations