EBC Markets Briefing | Yen stays above 160 with GDP revised lower

The Japanese yen was muted Monday, having erased its gains made in the wake of Tokyo's intervention just ⁠over a month ago. The country's growth cooled in Q1 on weak capex, revised data showed.

Sources told Reuters that the BOJ is expected to raise interest rates this month. Governor Ueda said policymakers must discuss the pros and ​cons of the move if inflationary risks outweigh ‌downside risks to the economy.

Japan's services PMI flatlined at 50.0 in May as business costs surged to a 43-month high, ending 13 months of sector expansion. Meanwhile, new order growth slowed to a 23-month low.

EBC Financial Group analyst say it will take a stronger, sustained tightening signal to move the ​currency meaningfully. Heightening tensions in the Middle East have showed few signs of letting off.

Iran on Sunday fired missiles at Israel, which retaliated with its own strikes as a shaky ceasefire hangs in the balance. The Trump administration is reportedly considering redirecting Iranian assets to Gulf allies.

US added 72,000 private-sector jobs last month, ​far exceeding estimates. Markets are now pricing in a more than 70% chance that the Fed will raise rates in December, according to the CME FedWatch tool.

The yen dropped to below the psychological 160 barrier. Given the parabolic nature of the last few sessions, a rally towards the major support at 159.4 per dollar may occur, offering a better chance to short.

Asset recap

As of market close on 5 June, among EBC major products, Progressive Corp shares led gains as bullish options flow and recent underwriting updates fuelled a rebound.

Micron Technology stock plunged after the company moved to lock in customers with new long-term supply contracts which could cap upside if memory prices continue to rise.

Gold fell by the most in three weeks as the release of new US jobs data reinforced expectations that the Fed will likely raise interest rates this year amid inflation concerns.

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