Yen extends gains on solid wage growth, consumer spending next

9月5日

The Japanese yen has posted gains on Thursday. In the North American session, USD/JPY is trading at 143.27 at the time of writing, down 0.33% on the day. The yen continues to pummel the US dollar and is up 1.9% this week. Since July 1, the yen has surged a massive 10.7%.

Average cash earnings in Japan rose 3.6% y/y in July, down from 4.5% in June, which was the highest since January 1997. Still, this beat the market estimate of 3.1%. Wages are a key factor as to how soon the Bank of Japan could raise interest rates.

Inflation has been moving higher but the BoJ wants to see increased wage growth as well in order to achieve the Bank’s target of sustainable inflation at 2%. Japanese firms agreed to a huge wage increase of 5.1% for 2024 and this is being reflected in solid wage growth.

Japan’s economy is showing signs of recovery and consumers are opening their wallets. Household spending will be released early Friday and is expected to rebound with a gain of 1.2% y/y in July, following a 1.4% decline in June.

In the US, all eyes are on Friday’s employment report, specifically nonfarm payrolls. After a lower-than-expected gain of 114 thousand in July, the markets expect a gain of 160 thousand in August. The weak July numbers triggered a meltdown in the financial markets and investors remain uneasy.

The Federal Reserve is poised to deliver a milestone rate cut on Sept. 18. The likelihood of a 25 bps cut stands at 61% and a 50 bps cut at 39%, according to CME’s FedWatch and these odds could change after the US employment report.

USD/JPY has pushed below support at 143.57 and tested support at 142.91 earlier

There is resistance at 144.10 and 144.76