Markets Cautious Ahead of Jackson Hole, U.S. PMI Stronger, Japan Inflation Cools

Global financial markets traded cautiously on Thursday as investors awaited Fed Chair Jerome Powell’s speech at the Jackson Hole symposium, seeking clarity on whether a September rate cut remains on track following mixed U.S. inflation prints and a hotter PPI.

With uncertainty elevated, equities and currencies stayed largely range-bound amid thin liquidity and positioning restraint.

U.S. Data — S&P Global PMIs Signal Robust Expansion

The latest S&P Global U.S. PMI data released Thursday showed business activity gaining momentum:

• Composite PMI: 55.4 (vs. 55.1 prior)
• Manufacturing PMI: 53.3 — a multi-year high
• Services PMI: 55.4 (slightly down from 55.7)

The data pointed to stronger output and solid Q3 growth momentum. However, price indices suggested that firms continue to pass on costs, keeping underlying inflation concerns intact.

This could encourage Powell to strike a cautious tone at Jackson Hole. The U.S. dollar extended modest gains following the release.

Japan Inflation Cools, But Remains Above Target

Japan’s July inflation data showed signs of cooling, though pressures remain elevated:

• Core CPI (ex-food): 3.1% y/y (down from 3.2%)
• Core-core CPI (ex-food & energy): steady at 3.4%

While headline pressures have eased, underlying inflation remains well above the Bank of Japan’s 2% target, sustaining expectations that the BoJ may proceed with further policy normalization later this year. Markets will closely watch Tokyo CPI and wage data for confirmation.

The yen reaction was muted, with broader sentiment anchored on Powell’s Jackson Hole remarks. With U.S.–Japan rate differentials narrowing only gradually, upside for the yen appears limited in the near term.

USDJPY Breakout Awaits

The USD/JPY has been trading in a tight range recently, reflecting investor caution ahead of Fed Chair Jerome Powell’s remarks at Jackson Hole. Markets are essentially waiting for fresh clues from both central banks before committing to a directional move.

The stronger U.S. PMI data lent modest support to the dollar, with USD/JPY holding above the 148.00 mark on Thursday. However, yen weakness was limited by still-elevated Japanese inflation, which keeps alive the prospect of further BoJ normalization later this year.

USD/JPY, H4 Chart Analysis | Source: Ultima Market MT5

In the near term, price action is expected to remain range-bound, with 149.00 as immediate resistance and 148.00 as key support. A hawkish-leaning Powell could drive USD/JPY higher, while a dovish surprise or stronger Japan CPI/wage data next week may increase downside pressure.

Overall, rate differentials continue to favor the U.S. dollar in the short run, but narrowing spreads suggest upside in USD/JPY may be increasingly capped beyond the 150.00–150.50 zone.

What to watch next?

• Powell at Jackson Hole (Fri): Any hint on pace/timing of cuts and how the Fed interprets mixed CPI/PPI signals. Bond yields and USD likely react first.
• U.S. data flow: PCE Price Index next week are likely to give a cross-check against the Fed’s stance
• Japan prints: Follow-through from nationwide CPI into Tokyo CPI/wages for BoJ path

Disclaimer

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