Yen Takes Center Stage as US Economic Data Remains Mixed
The US economic data was mixed on Tuesday, but the Japanese yen took center stage in FX markets. The yield trend continued to rise initially, but lost momentum as the session progressed.
The ADP report showed a 38k job growth in the US, close to expectations. The oil price increase slowed down, which tempered the bond market's intraday momentum. US President Trump indicated that the current attacks on Iran would likely be short-lived, with Brent oil closing at $95.6/b.
The German yields rose between 3.5 bps (2-y) and 1.8 bps (30-y), with the 2-y yield surpassing the 3% barrier for the first time since mid-2024. US yields also closed higher, but at a slower pace.
The Fed's Beige Book suggested that the labour market is stable, but consumers and businesses are concerned about higher energy prices putting upward pressure on prices. The S&P 500 rebounded modestly after three days of losses, while the yen jumped from USD/JPY 159.50 to the USD/JPY 158.7 area.
The market is now focused on the BoJ's policy meeting on September 18, which could be an opportunity for more coordinated action. The EUR/USD closed little changed at 1.159, while sterling traded defensively. Asian equities showed a mixed picture this morning, struggling to maintain momentum after yesterday's rebound in the US.