The USD/JPY started the month almost flat after the release of US ADP Nonfarm payroll data for June. The pair was trading at 111.117 on Thursday.
Japan Economic Sentiment
The USD/JPY pair reacted to Japan’s big manufacturers’ business confidence. Japanese big manufacturers’ confidence improved and hit a two and a half year high in the Quarter 2 2021. This reflected the boost by global demand to the Japanese economy.
Service sector confidence was also up for the first time in five quarters. This suggested that the Japanese economy is staged for a sooner than expected recovery. However, the country is still struggling to contain the Delta variant.
The headline for big manufacturers’ sentiment was up 14 points from 5 points in March. According to the Bank of Japan, the index has been on a winning streak for four consecutive quarters. The index hit its highest level since December 2018.
Land prices in Japan slipped 0.5% on average in 2021 compared to last year. This was the first decline in six years. According to data by the government, the decline was boosted by lack of demand by foreign visitors amid the corona virus pandemic.
US Inflation Concerns
US ADP Nonfarm payroll data for June came in at 692,000. It surpassed the estimate forecast of 683,000 albeit was lower than the previous month’s 978,000. The service providing sector posted the largest gains as businesses started reopening with the easing of lockdown restrictions.
Leisure and hospitality were up 332,000 pushing the numbers in the service providing sector up 624,000. The service sector was the hardest hit after the onset of the corona virus pandemic.
Job gains had totaled about 3 million since the beginning of 2021. Despite the gains, the jobs numbers were still around 7 million below the pre-pandemic levels.
Mortgage applications for home purchases edged 17% lower annually while weekly mortgage demand slipped 6.9% for the week. Mortgage demand is on a slump due to weakening affordability. Michael Fratantoni stated that:
“Mortgage rates were volatile last week, as investors tried to gauge upcoming moves by the Federal Reserve amidst several divergent signals…”
The USD/JPY will react to US initial jobless claims data for this week. The data is due later in the day at 08:30 (GMT-4:00). Investors are looking ahead of the data to gauge whether the Federal Reserve will consider tapering its monetary policies earlier than expected. Analysts expect the jobless claims to decline to 390,000 from 411,000.