Following the US PCE Deflator, the French Election this Weekend: Plenty to Watch Next Week

This week, the USD/JPY exchange rate has risen from around 159 yen to the 161 yen level. Although the price range itself is only slightly over 2 yen, clearing the psychological level of 160 yen, which was the previous intervention point, has impacted the market. Cross-yen pairs have also shown an upward trend, with EUR/JPY rising to the 172 yen level, the highest since the euro's inception. As the yen exchange rate leads the way, the anticipation of government and BOJ intervention is gradually increasing.

Today, the US PCE Deflator, an important indicator for US financial authorities, will be released. The market forecast is a slight slowdown to +2.6% year-on-year from the previous +2.7%. For the core deflator, a slowdown to +2.6% year-on-year from the previous +2.8% is expected. Attention will be on the market reaction post-announcement. Depending on whether inflation is seen as continuing to slow down or remaining sticky, intervention may be more likely, so it's important to watch the USD/JPY exchange rate closely.

Additionally, the French parliamentary election will be held on the 30th. Opinion polls show no change in the dominance of the far-right faction led by Le Pen. The defeat of President Macron's ruling party seems inevitable. However, the President has denied resignation, indicating that France's politics will be managed by different political forces for foreign and domestic economic affairs. At the beginning of next week, we will want to analyze the results and check the reaction of French government bonds.

Upcoming economic indicators in overseas markets include the KOF Swiss Leading Indicator (June), German Employment Statistics (June), South African Trade Balance (May), Brazilian Employment Statistics (May), Canadian Real GDP (April), US Personal Income and Expenditure (May), US PCE Deflator (May), US Chicago PMI (June), and the final Michigan Consumer Sentiment Index (June).

Regarding event-related announcements, the BOJ government bond purchase schedule (July-September) and forex intervention results (May 30 - June 26) will be released. There will be opportunities for speeches from Governor Villeroy de Galhau of the Banque de France, President Barkin of the Richmond Fed, President Daly of the San Francisco Fed, and FRB Governor Bowman.

Today, the Biden vs. Trump debate for the US presidential election took place, and the dollar has strengthened due to perceived Trump advantage.

However, since the dollar has been rising throughout the week and it is the weekend, some profit-taking is expected.

Additionally, it was reported that the forex intervention amount was zero (from May 30 to June 26), suggesting that the BOJ still has room for intervention, making the USD/JPY susceptible to selling pressure.