Yen strengthens on surprise GDP surge; markets trim Fed cut expectations

The Japanese yen advanced on Friday after stronger-than-expected economic growth data, while the US dollar held steady against the euro and British pound as traders trimmed expectations of aggressive monetary easing by the US Federal Reserve.

Japan’s economy expanded faster than forecast in the second quarter, with export volumes proving resilient despite new US tariffs. The yen climbed 0.4 percent against the greenback to P147.125 and gained 0.3 percent versus both the euro and the pound. 

The move came after US producer prices surged in July by the most in three years, underscoring stubborn inflationary pressures that could complicate the Fed’s rate-cut path. Markets had previously priced in a possible 50-basis-point cut in September, but Thursday’s data erased those expectations, according to the CME FedWatch tool. Bets for a smaller 25-basis-point reduction remain elevated.

The euro and pound were little changed after Thursday’s declines of 0.5 percent and 0.3 percent, respectively. The US retail sales report due next week, along with Fed Chair Jerome Powell’s remarks, will be critical in gauging the next moves for the dollar.

In the Asia-Pacific, the Australian dollar was flat, while the Chinese yuan eased from a two-week high following softer economic data from China.

Investors also monitored geopolitical developments ahead of a scheduled meeting between US President Donald Trump and Russian leader Vladimir Putin in Alaska, seen as an early step toward possible peace talks on Ukraine.

In cryptocurrency markets, bitcoin and ether rebounded after Thursday’s sharp drop, with bitcoin recovering from losses after briefly touching a record high earlier in the week on shifting Fed expectations.

For Philippine importers and exporters, currency volatility in major markets – especially the yen and US dollar – could influence trade costs in the coming weeks.