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Investing.com - Bank of America has outlined two-way risks to its bullish USD/JPY forecast of 155 by year-end, citing recent U.S. employment data and Japanese political developments.
The latest downward revision to U.S. nonfarm payrolls has challenged the bank’s assumption of no Federal Reserve rate cuts for 2025, according to a research note published Monday.
Bank of America’s economists maintain that weakness in employment may be related to supply shortages in the labor market rather than demand issues, referencing their August 4 economic viewpoint that still does not anticipate Fed rate cuts this year.
The research note also highlighted Japanese politics as a potential downside risk for the yen, pointing to "elevated political uncertainty and fiscal risk" surrounding the Liberal Democratic Party’s leadership race, as detailed in the bank’s July 23 Japan viewpoint.
Bank of America indicated it now prefers a short position on JPY versus EUR rather than USD, noting that Japan’s outward investment appears less concentrated in the United States.
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