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The USD/JPY exchange rate fell about 0.30%, trading near 148.90 during the early European session on Monday. This decline in the USD/JPY pair was driven by market speculation suggesting that the U.S. Federal Reserve (Fed) may adopt a more accommodative monetary policy in the coming year.
Negative sentiment towards the U.S. dollar (USD) was further exacerbated by various Global S&P PMI data, as the Fed emphasized that its decisions would depend on incoming data.
The latest U.S. Composite PMI for November remained steady at 50.7. The Services PMI rose to 50.8 in November from 50.6 in October. However, the Manufacturing PMI fell to 49.4 from 50.0, below the expected 49.8.
The Japanese yen (JPY) strengthened against the U.S. dollar on Friday, supported by the release of Japanese inflation data. The National Consumer Price Index (CPI) for October showed a year-on-year increase of 3.3%, up from 3.0% in September. However, the CPI excluding Food and Energy decreased to 4.0% year-on-year, compared to the previous figure of 4.2%. The CPI excluding Fresh Food rose to 2.9% from 2.8% in the prior reading.
Bank of Japan Governor Kazuo Ueda downplayed the likelihood of Japan consistently reaching its 2.0% inflation target. While acknowledging Japan's moderate economic recovery and the narrowing output gap to nearly zero, Ueda noted the uncertainty surrounding the sustainability of this strengthening cycle. He was cautious in shaping market expectations regarding potential changes in BoJ policy in the near future.
This week appears to be significant for investors, with a key focus on Japanese Retail Trade, which could provide insights into consumer spending trends in the country.
Meanwhile, attention in the U.S. is on the annualized Gross Domestic Product (GDP) for the third quarter, which will give a comprehensive view of the country's economic performance. Additionally, the Core Personal Consumption Expenditures (PCE) Index, as a key inflation indicator, will be closely monitored to assess price trends excluding volatile food and energy components.
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