USD/JPY dips below 150.50 amid cautious market mood, upcoming US housing data

The USD/JPY currency pair continues its descent, now slipping below the 150.50 mark, amidst a broader context of market wariness and the anticipation of forthcoming U.S. housing sector data. This downward movement is part of a trend that’s been observed for two consecutive days, with the exchange rate hovering near 150.30 during the European trading session on Friday. Several factors are contributing to this cautious sentiment in the market, not the least of which is the growing skepticism about the Federal Reserve’s next steps. Recent economic data from the United States has been less than stellar, dampening expectations of further interest rate hikes.

The Bank of Japan’s (BoJ) current approach is also playing a role in the dynamics of the USD/JPY pair. BoJ Governor Kazuo Ueda reaffirmed the bank’s commitment to a gradualist policy approach, emphasizing the uncertainty surrounding the achievement of the 2% inflation target. This dovish posture by the BoJ provides a backdrop of support for the USD/JPY pair, even as it faces downward pressure.

The labor market in the U.S. has shown signs of strain, with Initial Jobless Claims for the week ending November 10th climbing unexpectedly to 231,000, overshooting the forecast of 220,000, and signaling the highest level in the past three months. Moreover, the Continuing Jobless Claims for the week ending on November 3rd also saw an uptick, reaching a peak not seen since the beginning of 2022, with 1.865 million claims as compared to the 1.833 million from the previous count.

In Japan, concerns about the currency market have led to public statements from Deputy Finance Minister Ryosei Akazawa. He has emphasized the government’s readiness to intervene in the foreign exchange market to curb excessive volatility. However, he clarified that the government does not have a predetermined exchange rate level that would automatically trigger such intervention.

Inflation in Japan is another area of focus, with a recent Reuters poll indicating expectations for the core Consumer Price Index (CPI) to have risen to 3.0% in October, a slight increase from the 2.8% figure previously recorded.

Attention from market watchers is also pivoting to the U.S. housing data set to be released, specifically Building Permits and Housing Starts for October. There is an expectation that a decrease in these indicators might reinforce the belief that the Fed will hold off on interest rate hikes in the near term. Furthermore, statements from various Fed policymakers, scheduled for Friday, are likely to be scrutinized for any hints of the central bank’s future monetary policy direction.