Forex▲ Bullish
Softer U.S. Data Dents Rate Hike Odds, Yen Eyes BOJ
July PPI miss and a 0.6% retail sales drop pulled September rate hike odds to 32%. Yen recouped some losses on BOJ hike chatter.
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A quiet mid-summer week turned on softer U.S. inflation and consumer data, pulling expectations for a September Fed rate hike down to 32% from 52% earlier in the week.
July's CPI matched forecasts. PPI undershot by a whisker. The bigger surprise came Friday: retail sales fell 0.6% in July, the steepest monthly drop since May 2025. Consumer sentiment also missed. The data drew bids into Treasuries and pushed the dollar lower against most G10 peers.
USD/JPY started the week strong as buyers returned and chatter about another BOJ intervention faded. But the yen reversed some of those losses after the CPI print and again on Friday, as speculation hardened that the Bank of Japan could raise rates as early as September. By the close, USD/JPY sat near 159.50, off its week-high around 160.50. The 10-day moving average has turned higher and is providing support near 158.50.
The Nikkei kept recovering, lifted by a weaker yen and fresh buying in AI-related names. The index is slightly overbought in the short run, several traders said. Medium-term buyers may wait for a pullback to the rising 10-day moving average near 67,000 before adding exposure.