The Japanese yen has lost ground in the Monday session, erasing the gains which marked the Friday session. In North American trade, USD/JPY is trading at 109.39, up 0.31% on the day. On the release front, key US indicators were mixed. Personal Spending improved to 0.4%, matching the forecast. This marked a 3-month high. The news was not as positive from the housing sector, as Pending Home Sales dropped to 0.4%, down sharply from 3.1% in the previous release. Later in the day, Japanese Final Manufacturing PMI is expected to edge up to 53.3 points. On Tuesday, the key event is ISM Manufacturing PMI.
On Friday, the Bank of Japan maintained its monetary policy but surprised the markets by ditching its target timeframe for reaching its inflation target. Governor Haruhiko Kuroda stated that the removal of the timeframe would prevent market speculation on additional easing each time the BoJ pushed back the timeframe for reaching its inflation goal. The bank has pushed back its inflation timeframe six times, due to weak inflation. In his remarks, Kuroda said that the reluctance of the business sector to raise wages continued to hamper the inflation outlook. In its quarterly review, the bank projected an inflation rate of 1.8% in fiscal 2019.
US indicators ended the week with the first GDP report for the first quarter. Advance GDP posted a respectable gain of 2.3% which beat the estimate of 2.0 percent. Still, this was a significant drop from GDP in the fourth quarter of 2018, which came in at 2.8 percent. Analysts also took note of the Employment Cost Index, which rose from 0.6% to 0.8%, another indication that inflation is moving higher. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers continue to project a total of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the US dollar could continue to make headway against its major rivals, including the Japanese yen.