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Sean Callow, analyst at Westpac, suggests that considerable bad news is arguably priced into USD/JPY but multi-week risks remain below 105.

Key Quotes

“The US and China proceeded with new tariffs on each other’s imports and wires reported that President Trump had to be talked out of doubling tariffs. But as the week progressed the risk mood improved on the Hong Kong backdown over the extradition bill and confirmation of US-China trade talks in early October, with lower level talks during September.”

“This left USD/JPY near the top of the past month’s ranges, though 107.00 could yet be a bridge too far. US yields are barely higher, with US data not supportive. Most dramatic was the slump in the ISM manufacturing index to below 50 but other releases have been little better, with the Atlanta Fed GDPNow estimate for Q3 down to 1.47% saar.”

“This should keep markets preparing for -25bp from the Fed on 18 Sep and a clearly dovish tone. The BoJ and MoF meanwhile have not indicated any policy change is looming.”