As economists forecast, the S&P Global Services PMI is expected to increase slightly from 54.8 to 54.9 in April. This slight uptick in the PMI could potentially shift investor expectations regarding future Fed interest rate cuts in 2024. However, it is crucial for investors to delve deeper into the sub-components of the PMI, such as employment, new orders, and prices, to get a comprehensive understanding of the economic landscape.
An upward trend in job creation and wages amidst a backdrop of increasing demand could significantly influence the Federal Reserve’s rate path. Therefore, investors should closely monitor these indicators to gauge the overall health of the US economy. Additionally, durable and core durable goods orders set to be released on Wednesday will provide further insight into the economic outlook.
Economists are anticipating that the US will steer clear of an economic recession, with upbeat figures signaling a robust economy. Projections suggest that durable and core durable goods orders will see a respective increase of 2.5% and 0.3%. Thursday will see a focus on US GDP and jobless claims, with higher-than-expected GDP numbers potentially prompting the Fed to maintain a higher-for-longer rate path to manage inflation.
On Friday, investors will be closely monitoring the Personal Income and Outlays Report, which is expected to show a 0.5% increase in personal income and a 0.6% increase in spending. Moreover, economists are forecasting a rise of 2.6% in the Core PCE Price Index year-on-year. These figures, along with housing sector data and Michigan Consumer Sentiment numbers, will play a crucial role in shaping investor sentiment.
Near-term trends in the USD/JPY pair will largely depend on the performance of the service sector PMIs, inflation rates, and the upcoming Bank of Japan press conference. Any economic indicators from the US surpassing expectations could lead to a divergence in monetary policy favoring the US dollar. The current positioning of the USD/JPY above its 50-day and 200-day EMAs suggests a bullish outlook, with a potential breakout above 154.787 opening the doors for further gains.
The upcoming release of key economic indicators will have a significant impact on USD/JPY trends. It is essential for investors to carefully analyze these reports to make informed decisions regarding their investment strategies in the forex market.