USD/JPY is holding steady around 146.10-15 as we enter Monday’s European session, following a slow start to the week with Japan’s GDP numbers and the US ISM Services PMI in focus. The lack of action in the Yen pair can be attributed to the US Labor Day holiday, as well as mixed signals from the US Federal Reserve (Fed) and the Bank of Japan (BoJ).
Earlier today, Japan’s Monetary Base data for August showed a 1.2% year-on-year growth in liquidity, compared to -1.3% in the previous period. Despite cautious optimism in the market and inactive bond markets due to the US holiday, the market still expects the BoJ to support the Japanese Yen (JPY).
In other news, market sentiment remains positive as China implements stimulus measures and hopes rise for no more rate hikes from the US Federal Reserve (Fed).
China’s government recently established a special cell to promote the private economy and remove barriers for the services industry, boosting sentiment on Monday. The People’s Bank of China (PBoC) also made a significant cut to its foreign exchange reserve requirement ratio (FX RRR), with several China banks reducing interest rates on Yuan deposits. Furthermore, there are reports that China will take more action to revive the country’s property sector.
On the flip side, the likelihood of the Federal Reserve (Fed) adopting a hawkish stance in the future has decreased, particularly following the mixed US jobs report for August. This positive market sentiment weighs on the USD/JPY price.
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