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USD/JPY started Monday higher, near 160, but ended the session lower at 159.62. Japan’s Vice Minister of Finance for International Affairs Masato Kanda said the US Treasury Department’s decision to add Japan to the monitoring list had “absolutely no impact” on its resolve to address the excessive currency speculation. Kanda clarified that Japan’s interventions did not seek to gain an unfair competitive advantage in international trade via a weaker exchange rate but to prevent excessive JPY depreciation that hurts Japan’s companies and households. Moving against falling US bond yields, the 10Y JGB yield firmed a third session by 2.1 bps to 0.996% in anticipation of more details regarding the Bank of Japan’s plan to trim bond purchases at July’s meeting. Hence, we cannot dismiss the downside risks in USD/JPY.
The DXY Index shed 0.3% to 105.47 on a 2.3 bps drop in the US 10Y bond yield to 4.23% ahead of the slower US PCE inflation data expected this Friday. The Fed is reminding markets of its dual mandate. San Francisco Fed President Mary Daly said the Fed is open to holding interest rates high for longer on sticky inflation or lowering them on rising unemployment rates. During the FOMC meeting on June 12, Fed Chair Jerome Powell said the Fed was ready to respond if jobs weakened unexpectedly and considered the recent higher unemployment rate as an important statistic. He will likely relay the same message during his semi-annual testimony on monetary policy to the US Senate Banking Committee on July 9.
Today, US Conference Board is expected to report a lower Consumer Confidence Index of 100 in June vs. 102 in May. It is crucial to pay attention to how consumers perceive employment prospects in the next six months. When the Fed announced its final hike in July 2023, the percentage of respondents who believed jobs were plentiful fell below those who thought jobs were scarce. This shift in perception is significant because Daly noted that falling job vacancies have started to lift the unemployment rate. Chicago Fed President Austan Goolsbee is also monitoring the rise in jobless claims and unemployment rate as signs that the US economy is no longer overheating, which could lead to a less restrictive policy if inflation slows and stays on track to return to its 2% target.
Quote of the day
“An owl is traditionally a symbol of wisdom, so we are neither doves nor hawks, but owls, and we are vigilant when others are resting.”
Urjit Patel
25 June in history
In 1950, North Korea invaded South Korea, starting the Korean War.
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