The increasing expectations that the Bank of Japan will raise interest rates next week provide some support for the Japanese yen at present. The U.S. GDP for Q2 will be crucial for the pair's trading today.
This may be since, ahead of the Bank of Japan's interest rate decision next week, markets are pricing in the risk of a rate hike now rather than in September. Additionally, potential foreign exchange market interventions by Japanese authorities could continue to weigh on the pair.
I believe the U.S. dollar may gain further strength after recent U.S. PMI data showed faster growth in private sector activity for July, reinforcing U.S. economic resilience despite higher interest rates. This data gives the Federal Reserve more leeway to maintain its restrictive policy stance if inflation shows no signs of easing.
Investors will closely watch U.S. annual GDP data (Q2) on Thursday and Personal Consumption Expenditures (PCE) inflation data on Friday. These reports are expected to provide new insights into U.S. economic conditions and the potential for a soft landing that the Fed talks about.
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