Better growth than expected – Commerzbank

The Japanese Yen (JPY) was unimpressed by this morning’s slightly better-than-expected GDP growth figures for the second quarter. There are probably several reasons for this. First, the Japanese GDP time series is quite volatile, so any data point should always be taken with a grain of salt. In addition, the previous quarter was revised slightly downward, which practically halves the upside surprise, notes Commerzbank currency analyst Volkmar Baur.

USD/JPY seems to be quite comfortable around 147

“On the positive side, private consumption was much better than expected. And the previous quarter was revised slightly higher. This is particularly important for the JPY, as private demand is expected to ultimately drive inflation in Japan. However, it should be noted that private consumption has not yet returned to the level of 1Q2023 and is still below the level of 3Q2019, i.e. before the pandemic.”

“However, all this was overshadowed by reports that BoJ Governor Ueda was invited by the Diet to justify market moves following the rate hike. The governor is likely to strike a dovish tone again to appease lawmakers, which is why I think the BoJ is unlikely to raise rates again in the very near future.”

“For now, USD/JPY appears to be quite comfortable around 147. However, it may not take much to pull it out of this fragile balance.”