Mixed US data: Japanese Yen edges up from session lows

• 0.7% remains the projected weekly gain for USD/JPY. The pair slips below 158.00 after US data releases.
• Despite forecast-beating US GDP growth in Q3, Personal Income and Spending weakened.
• A hawkish hold is the market expectation ahead of Friday's BoJ meeting.

USD/JPY remains on course for a 0.7% weekly gain. On Thursday, however, the Japanese Yen (JPY) recovered some ground against the US Dollar (USD) as weaker-than-forecast Personal Income and Spending figures tempered optimism over the strong Gross Domestic Product (GDP) reading. From session highs just above 158.00, the pair has pulled back to around 157.90.

At an annualised 3.4%, third-quarter US economic growth exceeded the 3.2% forecast, according to the US Bureau of Economic Analysis. The pace accelerated from 2.2% in the preceding quarter.

Personal Income and Spending: Sharper Slowdown Than Expected

September's preliminary US Personal Consumption Expenditures (PCE) reading rose to 3.6% year-on-year, compared with 3.4% in August. By contrast, Personal Income growth slowed to 0.2%, missing expectations for an unchanged 0.3% increase. Personal Spending growth also decelerated, reaching 0.5% after 0.9% in the previous month. The figures point to easing inflationary pressure from consumer demand, lending support to Fed Chairman Kevin Warsh's confidence in the bank's monetary policy.

Interest rates were held steady on Wednesday by the Federal Reserve (Fed), in line with broad expectations. Warsh's subsequent press remarks were interpreted as leaning dovish. Expressing confidence that the “monetary medicine is starting to work”, he also said the bank might reach its 2% inflation target without having to “throw people out of work”.

A modest US Dollar retreat followed Warsh's remarks. Markets interpreted them as suggesting that the bank might need to raise rates by less than currently expected in 2027.

Friday's Asian session brings the Bank of Japan (BoJ) monetary policy decision, which now takes centre stage. Expectations are for unchanged interest rates alongside a signal of another increase in December. Any departure from that outcome would be disruptive. An immediate rate rise is out of the question, while any challenge to the unwritten rule of quarterly rate increases would likely trigger a sharp Yen decline.