USD/JPY Forecast Nov. 30-Dec. 4 – Yen steady as inflation drops

USD/JPY fundamental mover

In Japan, all three releases last week were inflation events. The Services Producer Price Index (SPPI) came in at -0.6% in October, its first decline since May 2013. This was followed by BoJ Core CPI, which is the Bank of Japan’s preferred inflation gauge. The index came in at 0.0%, where it has hovered for most of 2020. The week wrapped up with a soft Tokyo Core CPI, which came in at -0.7%, its fourth straight decline.

In the US, PMIs for October indicated stronger growth in the manufacturing and services sectors. Services PMI improved to 57.7, as the index accelerated for a seventh straight month. Manufacturing PMI climbed to 56.7, up significantly from 53.3 beforehand. Both PMIs were well into expansionary territory, which indicates that the economic recovery continues to gain traction. Unemployment claims climbed for a second straight week, with a reading of 778 thousand. This was much higher than the estimate of 732 thousand. Durable goods orders reports were mixed. The headline figure slowed to 1.3%, down from 1.9%. However, the core release climbed from 0.8% to 1.3%.

The week wrapped up with the FOMC minutes of the November policy meeting. The minutes showed that officials did not believe any changes were needed to the current bond-purchase scheme of $120 billion/month. At the same time, they were of the opinion that “circumstances could shift to warrant such adjustments.”