USD/JPY pares the biggest weekly gains in five years around 130.50 ahead of US inflation By anilpanchal7 USDJPY RiskAppetite Fed YieldCurve BOJ
in the US Treasury yields, as well as chatters of monetary policy divergence between the Fed and the Bank of Japan to post the biggest weekly gain since late 2016.
The US 10-year Treasury yields posted the first weekly gains in four, backed by a strong US jobs report and hawkish Fedspeak. On Friday, US came in 390K for May, more than 325K expected but lesser than the upwardly revised 428K previous readouts. Further, the Unemployment Rate remained unchanged at 3.6% versus expectations of a slight decline to 3.5%. Additionally, the US ISM Services PMI fell to 55.9 in May, versus 56.4 market consensus and 57.1 flashed in April.
Following the data, Cleveland Fed President Loretta Mester crossed wires while saying that the one problem that the Fed has is inflation. The policymaker also added that the risks of a recession have gone up. It’s worth noting that the firmer US NFP joined the recently hawkish Fedspeak to propel the odds of a third 50 bps rate hike in September to 75% from 35% appeared last week, which in turn weighed on market sentiment.
At home, Bank of Japan Governor Haruhiko Kuroda repeats his support for easy money policies while also saying, “If moves are not too sharp and stable, weak yen is positive for Japan’s economy,” per Reuters. It’s worth noting that the risk-positive headlines concerning China limit the immediate downside of USD/JPY, due to its risk barometer status. Beijing’s readiness to ease the virus-led activity controls joins the US preparations for announcing tariff relief for China to underpin cautious optimism in the market. “Dine-in service in Beijing will resume on Monday, except for the Fengtai district and some parts of the Changping district, the Beijing Daily said.