- USD/JPY is gradually declining despite rising retail trade and industrial production data from Japan.
- Improved US consumer confidence and a hawkish Fed supported the DXY.
- The US NFP is expected to land at 300k, lower than the previous release of 528k.
USD/JPY came under mild selling pressure and retreated towards 138.50 after the release of upbeat economic data. Japan’s retail sales improved to 2.4%, better than expectations of 1.9% and the previous release of 1.5% on an annual basis. Also, monthly retail trade rose 0.8%. Meanwhile, the Industrial Production data landed higher at 1.8% than expected and the old version of -2.6% and -2.8% respectively.
On a broader note, the asset remained in the grip of the bulls as the US Dollar Index (DXY) posted an outstanding performance. The DXY is aiming to regain its two-decade high at 109.29 after upbeat consumer confidence data and hawkish comments from Federal Reserve (Fed) policymakers.
Conference Board (CB) consumer confidence data improved significantly to 103.2, significantly higher than the previous release of 95.3, recorded in July. Improved consumer confidence in the economy translates into increased retail demand and ultimately supports the respective currency. In addition, advice from New York Fed Bank President John Williams breathed new life into the DXY.
Fed Williams expects interest rates to escalate above 3.5% by this year as there is a strong need to slow the rise in inflation. He added that next year the inflation rate may drop to 2.5-3%.
This week, investors will remain focused on US Nonfarm Payrolls (NFP) data, which will be released on Friday. Despite the shutdown of the recruitment process by various tech giants and the consequences of reduced liquidity, the data on job creations should remain satisfactory. Economic data is seen at 300k, down from the previous release of 528k.
