Ella 
USD/JPY is hovering around 147.50 after pulling back from 147.70 during early European trading on Friday. Meanwhile, the U.S. Dollar Index (DXY) is trading close to its highest daily close since March, near 105.30, on the back of strong U.S. economic data. Ahead of next week’s Federal Open Market Committee (FOMC) meeting, market participants will take cues from a preliminary University of Michigan consumer confidence survey.
On Thursday, the U.S. Bureau of Labor Statistics (Bureau of Labor Statistics) announced that the producer price index (PPI) increased by 1.5% year-on-year in August, higher than the previous value of 0.8% and expectations. The annual core figure fell to 2.2% from 2.4%. Meanwhile, retail sales rose 0.6% monthly in August, beating estimates of 0.2%. Separately, the Labor Department reported that weekly initial jobless claims rose to 220,000 from 217,000, below the consensus estimate of 225,000. The data suggest the U.S. economy remains resilient, with inflation rebounding in August.
However, the Federal Reserve’s (Fed) monetary policy expectations did not change significantly as a result of these data. Markets expect the Federal Reserve to keep interest rates unchanged at its meeting next week. Meanwhile, the Fed’s hawkish stance remains positive for U.S. bond yields and the dollar for now.
On the yen, Bank of Japan (BOJ) policymakers said they would not consider exiting ultra-loose policies as long as wage and inflation data do not meet expectations, putting the yen at a disadvantage against its rivals.
Japan’s July machinery orders fell 13% on Thursday, compared with -5.8% in the previous month. Both data were below market consensus. Disappointing data failed to boost the Japanese yen (JPY) despite a dovish tone from Bank of Japan officials.
Market participants will be watching for the release of the US Empire State Manufacturing Index, Industrial Production and the University of Michigan Consumer Sentiment Survey. The data could provide a hint on where the Fed will peak interest rates for the rest of the year ahead of a Fed meeting next week.
