USD/JPY strengthens further beyond 143.00, hits fresh daily peak amid modest USD strength

• USD/JPY stages a goodish recovery from over a one-month low touched on Friday.
• The JPY is undermined by a downward revision of Japan's Q2 GDP growth figures.
• Reduced bets for a larger Fed rate cut boost the USD and lend additional support.

The USD/JPY pair attracts fresh buyers at the start of a new week and reverses a major part of Friday's losses to the 141.75 area or over a one-month low. Spot prices maintain the bid tone through the early European session and currently trade around the 143.20 mark and draw support from a combination of factors.

The Japanese Yen (JPY) is pressured by a downward revision of the second quarter Gross Domestic Product (GDP) print, which, in turn, is seen as a key factor acting as a tailwind for the USD/JPY pair. Official data published earlier today showed that Japan's economy grew at a slightly slower pace, by an annualized 2.9% in the April-June quarter as compared to a 3.1% rise in the preliminary estimate. This, along with a sluggish consumer spending growth in July, might complicate the Bank of Japan's (BoJ) plans to hike interest rates in the coming months.

Apart from this, a generally positive tone around the European equity markets is seen undermining demand for the safe-haven JPY. The US Dollar (USD), on the other hand, builds on Friday's recovery from over a one-week low amid an uptick in the US Treasury bond yields, bolstered by reduced bets for a 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) later this month. This further contributes to the USD/JPY pair's intraday positive move, though the divergent BoJ-Fed policy expectations warrant some caution before positioning for further gains. 

The BoJ Governor Kazuo Ueda said last week that the central bank will continue to raise interest rates if the economy and prices perform as expected. Adding to this, an unexpected rise in Japan's real wages for the second straight month in July keeps hopes alive for another BoJ rate hike by the end of 2024. Hence, it will be prudent to wait for strong follow-through buying beyond the 143.75-143.80 horizontal support breakpoint before confirming that the USD/JPY pair's recent downfall has run its course and positioning for any further appreciating move.