Ella 
Entering the European session on Tuesday, USD/JPY fell slightly to around 145.50-45, recording the first day of decline in 7 days. The pair took cues from upbeat Japanese GDP data and the dollar retreating in a subdued Asian session.
Japan’s second-quarter GDP grew by 1.5% month-on-month, compared with an expected 0.8% and the previous value was 0.7%. In addition, Japan’s industrial output in June increased by 2.4% year-on-year, compared with expectations and the previous value of 2.0%.
Elsewhere, Japanese Economy Minister Shigeyuki Goto referred to expectations of a modest economic recovery before saying he needed to focus on the risks of a global slowdown and the impact of rising prices.
Notably, the latest comments from Japanese Finance Minister Shunichi Suzuki also signaled that Tokyo may intervene again and put downward pressure on USD/JPY prices. Still, the policymaker ruled out targeting specific price levels when intervening, while also expressing his dislike for quick moves.
On the other hand, the U.S. dollar index retreated from a five-week high, recording its first day of losses in four days near 103.05, after reports of a decline in inflation. The New York Fed’s one-year inflation forecast fell to 3.5% in July, down 3 basis points to the lowest level since April 2021. But the New York Fed survey also showed confidence in positive labor market conditions and economic excesses.
Elsewhere, U.S. 10-year Treasury yields hovered at their highest level since November 2022 recorded the previous day and are now at 4.20%, also challenging dollar-yen bulls to extend the previous session’s gains.
It should be pointed out that the market sentiment is cautiously optimistic, and European and American stock index futures rose slightly, which also tested the USD/JPY bulls.
U.S. retail sales are expected to rise 0.4% in July, compared to 0.2% previously, and will be a short-term focus ahead of Wednesday’s FOMC meeting minutes. Overall, the bond market and policy divergence between the BoJ and Fed will be key for clear guidance.
