US Dollar Weakness Offsets by Japanese Yen Support Amid Rising BoJ Hike Odds
The US Dollar (USD) remains under pressure due to weaker-than-expected economic releases. The Automatic Data Processing (ADP) report showed that the US private sector added 44K jobs in July, below the market consensus of 70K and following a gain of 98K in June.
Meanwhile, the Institute for Supply Management (ISM) reported that its Services Purchasing Managers Index (PMI) came in at 54.1 in July, slightly below expectations of 54.5. The Employment Index fell to 47.4 from 51.2 previously, highlighting softer hiring conditions.
The Greenback is also weighed down by reports that the US Treasury Department has lifted selected Iran-related sanctions, removing restrictions on two aircraft and three airlines. This move is viewed as a sign of progress in negotiations between the United States (US) and Iran.
On the Japanese side, investors continue to assess the Minutes of the Bank of Japan (BoJ) June policy meeting. Although the document predates the latest monetary policy developments, it shows that policymakers were already debating the need for further rate hikes in response to inflation risks.
Strategists at Brown Brothers Harriman note that USD/JPY is holding just under its 200-day moving average (158.04) as stronger wage data in Japan bolster expectations for further BoJ tightening. Implied odds of a 25 bps BoJ rate hike to 1.25% at the next September 18 meeting rose to 60% from nearly 40% ahead of the wage data.