On Monday, June 30, key economic data from Japan and trade headlines will fuel Bank of Japan rate hike bets and USD/JPY trends. Economists forecast industrial production to rise 0.3% year-on-year in May, slowing from a 0.5% increase in April.
A lower industrial production reading may reflect the impact of US tariffs on demand for Japanese goods. Given Japan’s trade-to-GDP ratio is around 50%, weaker demand may impact the economy and temper BoJ rate hike bets. Conversely, a higher print may fuel speculation about a Q3 BoJ policy move.
During the US session, the Chicago PMI and the Dallas Fed Manufacturing Index would likely influence Fed sentiment and US dollar demand.
Slower contractions across Chicago’s private sector and Dallas’ manufacturing sector may ease fears of a US recession, sending USD/JPY toward 145. However, unless there are sharp increases in the numbers, Monday’s reports are unlikely to derail expectations of a Fed rate cut, limiting USD/JPY gains. Meanwhile, weaker readings may drag the pair toward 142.5.
Investors should also monitor Fed speakers. Growing support for further monetary policy easing would pressure USD/JPY.
