Ella 
USD/JPY strengthened to around 145.35 in early Asian trading on Thursday. Data on Japan’s record trade deficit dragged down the yen (JPY), supporting USD/JPY. On Friday, traders will pay close attention to speeches by Bank of Japan Governor Kazuo Ueda and Federal Reserve Chairman Powell at the Jackson Hall Conference. These events are likely to trigger market volatility.
The minutes of the Federal Reserve’s July 30-31 meeting released on Wednesday showed that most Fed officials agreed last month that as long as inflation continues to cool, the benchmark interest rate may be lowered at the upcoming meeting in September. Policymakers kept the benchmark rate at 5.3% in July, a level that has remained for more than a year. Markets are fully pricing in a September Fed rate cut, with a full percentage point cut expected by the end of the year. Rising expectations of a Fed rate cut could weigh on USD/JPY in the short term and limit upside for USD/JPY.
On the other hand, most economists expect the Bank of Japan to raise rates again before the end of the year. A Reuters poll on Wednesday showed the median forecast for year-end rates at 0.50%, an increase of 25 basis points (bps). Traders will get more clues from Bank of Japan Governor Kazuo Ueda’s speech in parliament on Friday. If Ueda makes hawkish comments, it could boost the yen against the dollar.
Data released by Nikkei Bank and S&P Global on Thursday showed that Japan’s manufacturing purchasing managers’ index (PMI) rose to 49.5 in August from 49.1 in July, but lower than the expected value of 49.8. At the same time, the service industry purchasing managers’ index rose to 54.0 in August from 53.7.
