The Japanese yen has posted slight gains in the Thursday session. In North American trade, USD/JPY is trading at 106.90, up 0.21% on the day. On the release front, it’s a busy day. In Japan, Capital Spending gained 4.3%, beating the estimate of 3.1%. Final Manufacturing PMI dropped to 54.1, within expectations. Consumer confidence slowed to 44.3, shy of the estimate of 44.9 points. Later in the day, Japan releases Household Spending and Tokyo Core CPI. In the US, Personal Spending slowed to 0.2%, matching the forecast. Unemployment claims dropped to an impressive 210 thousand, well below the estimate of 222 thousand. Next up, Fed chair Jerome Powell testifies before the Senate Banking Committee. On Friday, the US publishes UoM Consumer Sentiment.
Jerome Powell will be on center stage on Thursday, as he testifies before the Senate Banking Committee. Powell addressed the House Finance Committee on Tuesday, and his remarks were decidedly hawkish. Fed chair said that the current policy of gradual rate increases would continue. He added that the economy was strong and that he expected inflation to move up to the Fed target of 2 percent. Importantly, Powell did not address the question of an acceleration of rate hikes, but his hawkish stance has increased the likelihood that the Fed will increase it projection from three to four rate hikes this year. Any hints that Fed will quicken its pace of rate hikes would be bullish for the US dollar.
US revised GDP came in at 2.5% in the fourth quarter, down from the initial estimate of 2.6% in January. This is considerably lower than the 3.2% expansion in the third quarter. The downward revision was attributed to lower inventory than expected. Importantly, consumer spending, a key driver of economic growth, remained unchanged at 3.8% percent in the fourth quarter. Despite the lower revision to GDP, sentiment remains positive on the US economy, and Jerome Powell’s hawkish testimony earlier this week marks an important vote of confidence in the US economy.
