The US Personal Income and Outlays report is set to be released, and it is expected to play a crucial role in determining the prospects of a September Fed rate cut. Economists are predicting that the Core PCE Price Index will increase by 2.6% year-on-year, a slight decrease from the 2.8% reported in April. If the figures fall below expectations, it could lead to increased confidence in a rate cut. However, higher personal income and spending trends may sustain demand-driven inflation, potentially necessitating a prolonged high rate trajectory.
Investors are advised to closely monitor the statements made by FOMC members following the release of the Personal Income and Outlays Report. Any hints at the timing of a Fed rate cut could significantly impact market sentiment. The speeches by FOMC members Thomas Barkin and Michelle Bowman are also expected to garner attention, potentially leading to market-moving commentary.
The USD/JPY currency pair is particularly sensitive to intervention chatter, US inflation data, and Fed speeches. A higher inflation rate in the US could trigger a Japanese government intervention, resulting in the Bank of Japan cutting JGB purchases more aggressively in July. As a result, the USD/JPY may face strong resistance to further upside movement.
From a technical standpoint, the USD/JPY has been trading comfortably above the 50-day and 200-day EMAs, indicating bullish price signals. A break above the recent high of 160.872 could pave the way for a push towards the 162 handle. However, a move below the 160 level could signal a retreat towards the 50-day EMA, potentially reaching the $151.685 support level.
Overall, the impending release of US inflation numbers and the subsequent market reactions are likely to have a significant impact on global markets. Investors should remain vigilant in monitoring key economic indicators, central bank interventions, and currency trends to navigate potential market volatility effectively.