usdyen wrap 01 August 2022

USD/JPY sharply declined, dropping 150 or points from the day’s highs above 133.50 to just shy of 132.00. There was no obvious catalyst to trigger the selling, it continued the fall it began after last week’s FOMC statement and Chair Powell’s press conference.

It was a busy weekend and day for data releases. Most notably the official China manufacturing PMI for July dropped back into contraction. The other China PMI, from Markit/Caixin, held just above the 50 dividing line, at 50.4. Its not new news that China’s economy is suffering from ongoing recurring COVID-related restrictions but the drop of the PMI back into contraction was a shock/surprise.

On the central bank front, weekend comments from Federal Reserve uber-dove Kashkari were notably hawkish. He dismissed concerns over the economy dropping into recession, saying that while the Fed is not happy if that happens it will nevertheless hike rates as necessary to drive inflation back to target.

Apart from USD/JPY other major FX rates moved in only minor sorts of ranges. EUR, GBP, AUD and NZD are all just a touch better bid against the USD.