USD flows: USD generally lower after data
July ADP employment and the US Q2 employment cost index were both on the soft side of expectations, and the USD is generally lower in response. Yields are generally lower across the board, suggesting the JPY ought to be the biggest beneficiary, but with the JPY already having made 3 big figure today, we may be reaching the limits of a daily JPY gain. However, with yield spreads with Europe not moving a great deal, EUR/USD still looks well confined to the 1.08-1.09 range.
JPY strength has extended after the Ueda new conference, in which he indicated a readiness the raise rates further if BoJ projections for growth and inflation proved correct. He also said JPY weakness was one of the factors behind the BoJ’s decision. The near term key for the JPY now looks to be the technical support area at 152, with the 151.70 level the 200-day moving average. Yield spreads suggests that there is scope for a move down to 140 and if we see a break of 151.70/152 this could be a target.
