• The Japanese Yen edges higher due to rising odds of the BoJ adopting a hawkish stance amid upbeat GDP data.
• Japan's Gross Domestic Product increased by 0.8% in Q2, marking the strongest quarterly growth since Q1 of 2023.
• The US Dollar appreciates due to improved Treasury yields despite rising expectations of the Fed’s rate cut in September.

The Japanese Yen (JPY) gains ground against the US Dollar (USD) on Thursday. This upside occurred as Japan’s Gross Domestic Product (GDP) growth for the second quarter surpassed expectations, supporting the argument for a potential near-term interest rate hike by the Bank of Japan (BoJ).

Japanese Economy Minister Yoshitaka Shindo stated that the economy is anticipated to recover gradually as wages and income improve. Shindo also added that the government will collaborate closely with the Bank of Japan to implement flexible macroeconomic policies.

However, the USD/JPY pair received support from the improved US Dollar amid higher Treasury yields. However, the potential for further gains in the Greenback may be constrained by increasing expectations of at least a 25 basis point rate cut by the US Federal Reserve (Fed) in September.

The moderate US Consumer Price Index (CPI) data has sparked debate about the extent of the Fed’s potential rate cut in September. Traders are favoring a more modest 25 basis point reduction, with a 60% probability, while a 50 basis point cut is still on the table. According to CME FedWatch, there is a 36% chance of the larger cut occurring in September.