Economists predict that the Philly Fed Manufacturing Index will stay steady at 4.5. A drop in the Index could raise concerns about a possible hard landing for the US economy, although it may not have a significant impact on the Federal Reserve’s rate path since the manufacturing sector only contributes less than 30% to the economy.
Jobless claims data in the US could affect investor expectations of a September Fed rate cut. Economists forecast that initial jobless claims will decrease from 242k to 235k in the week ending June 15. Lower-than-expected numbers could dampen hopes of a rate cut, as a tight labor market may lead to wage growth and higher disposable income, potentially boosting consumer spending and inflation.
On the other hand, a Fed rate path that remains higher for longer could lower borrowing costs, reduce disposable income, and limit consumer spending. Housing sector-related data is also important, but labor market figures are likely to take precedence.
Investors should pay attention to speeches by FOMC members, such as Thomas Barkin, as their views on inflation and the timing of a rate cut could impact demand for the US dollar. The Richmond Fed President recently stated that more progress on inflation would be necessary before considering cutting interest rates.
In the short term, trends for the USD/JPY pair will depend on BoJ discussions, inflation data from Japan, and Services PMIs from both Japan and the US. Positive developments in the service sector in Japan and higher-than-expected inflation figures could prompt the BoJ to discuss raising rates, potentially shifting the divergence in monetary policies towards the Yen as the Fed weighs a rate cut.
Looking at the USD/JPY price action, the pair remains above the 50-day and 200-day EMAs, indicating bullish trends. A move towards the 158 handle could lead to a challenge of the 160 handle and the April 29 high of 160.209. Conversely, a drop below the 157.5 handle could signal a decline towards the 50-day EMA and the 151.685 support level. The 14-day RSI suggests a potential return to the April 29 high before entering overbought territory. Overall, central bank discussions and labor market data are key factors to watch in the coming days.