During today's Asian trading, the US dollar declined slightly against major currencies, while investors are preparing for the publication of important US data that will help assess the current state of the economy.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.10% to 104.29. As for the data, the GDP report for the 2nd quarter will be released later today, and tomorrow, the personal consumption expenditures price index for June (the Fed's preferred inflation indicator) will be presented. U.S. GDP grew by 1.4% in the first quarter, the slowest pace since the economy contracted in the first half of 2022. In addition to volatility due to inventory fluctuations, a slowdown in consumer spending has led to weaker economic growth. After consumers depleted their excess savings from the pandemic era, and increased interest rates led to an increase in overdue debt, the decline in wage growth seemed to be the last push that consumers needed to normalize their spending patterns. Consumer spending is far from free-falling, as evidenced by stronger-than-expected retail sales data. Nevertheless, spending continues to decline compared to the increased pace in 2023, which reinforces expectations of weaker economic growth by the end of the year. According to forecasts, GDP grew by 2% QoQ in the 2nd quarter after an increase of 1.4% QoQ in the 1st quarter.
The yen rose 0.8% against the US dollar, reaching its highest level since May 3, as yen carry trades unwound and risk appetite soured. Investors are also preparing for the meeting of the Bank of Japan, which will be held next week. Sources said that the Central Bank is likely to discuss whether to raise interest rates, and unveil a plan to roughly halve bond purchases in the coming years, signaling its resolve to steadily unwind its massive monetary stimulus. Demand for the yen, which is seen as a safe haven asset, also increased amid yesterday's collapse of the US stock markets. Meanwhile, today the Japanese government maintained its assessment of the state of the economy in its monthly economic report, but revised down its export forecast, citing the effects of slowing demand in China.