MARKET REVIEW   FOREX   Central Banks

US Factories Roar, Japan and US Strike Back

ISM hits a four-year high just as Japan and Washington team up to defend the yen.

Followme News Desk  |  August 4, 2026

US manufacturing just posted its best number since May 2022. The ISM Manufacturing PMI came in at 55.6% for July, up 2.3 points from June a seventh straight month of expansion and the fastest growth rate in over four years. New Orders expanded for the seventh month running at 56.7%, Production jumped 6.3 points to 58.5%, and Employment cracked back above 50 for the first time in 33 months, at 52.8%. Strong across the board. But the comments section tells a messier story: 57% of negative remarks cited pricing volatility, 43% flagged the Iran war, 18% pointed to tariffs. Growth's real. So is the cost pressure underneath it.

Meanwhile the yen just got jumped. USD/JPY eased to around 157.40 Tuesday morning after Japan and the US confirmed coordinated yen-buying intervention. Japan's Finance Minister Satsuki Katayama said Tokyo and Washington won't hesitate to act again. Bessent backed her up. Trump called it "a signal of friendship." Not a token move either, Bloomberg puts Japan's Friday spend at roughly $34 billion, and BNY Mellon's Geoff Yu calls it the first joint US-Japan intervention since 1998. First one in almost thirty years. That's not jawboning, that's action.

Right as that support lands, Tokyo hands the yen a new problem. Japan's ruling party backed cutting the food consumption tax from 8% to 1% for two years starting next April, plus roughly ¥600 billion a year in cash transfer funding still unspecified. So intervention buying yen strength with one hand, an unfunded spending package chipping away at it with the other. Markets don't usually let that sit for long.

Oil's running its own playbook. WTI trades near $79.40, up about 0.75%, on fresh doubts over US-Iran talks on Monday. Iran said Monday there's no delegation, no meetings planned flatly contradicting Trump, who cited resumed negotiations as the reason he called off weekend strikes. Unconfirmed drone strikes on US assets in Kuwait added fuel. A senior adviser to Iran's Supreme Leader also warned Tehran won't permit shipping through the Strait of Hormuz outside its own designated routes, and that US vessels risk serious casualties if the standoff drags on. Rabobank's Benjamin Picton calls this pattern "Groundhog Day": strikes resume late-week, oil rallies, stocks sell off, yields rise, repeat. He gives it decent odds of playing out again this week.

WTI   $80.97 as of Aug 4, 2026 - View Live Chart →

The Facts

• ISM Manufacturing PMI: 55.6% in July, up from 53.3% in June. Highest since May 2022.
• Employment Index: 52.8%, back above 50 for the first time in 33 months.
• Prices Index: Still hot at 71.1%, down from 73%. Tariffs, steel, aluminum, Middle East-linked fuel costs all named drivers.
• USD/JPY: Around 157.40, after confirmed joint US-Japan intervention. First coordinated operation since 1998. Japan spent roughly $34 billion on Friday alone.
• Japan fiscal risk: Food tax cut 8% → 1% for two years, plus ~¥600B/year in cash transfers. Funding source: not yet named.
• Friday's catalyst: July Nonfarm Payrolls. Expected +83,000 vs. +57,000 prior. Unemployment seen ticking to 4.3% from 4.2%.
• WTI Crude: Around $79.40, up roughly 0.75%. Iran uncertainty and Hormuz threats outweigh OPEC+'s Sunday decision to raise output from September.
• Gold: Ranging around $4,050. Firm dollar on one side, safe-haven demand on the other. Neither winning yet.

What It Means

That PMI print would normally put a Fed hike right back on the table. Strong orders, strong production, employment finally green after nearly three years underwater. But the intervention news muddies any clean "strong data, stronger dollar" trade against the yen specifically. Two governments jointly stepping into a market is a different signal than a policymaker talking tough on a podcast. Doesn't mean USD/JPY can't grind back up. Just makes chasing that move against the yen more expensive than it looks.

Japan's fiscal plan is the real risk sitting under intervention. Currency support tends to get discounted fast once fresh long-term risk shows up on the other side of the ledger, and an unfunded tax cut plus cash transfers is precisely that. If the funding details land thin in the coming weeks, that erodes whatever intervention they just bought quietly, not with a headline.

Oil's simpler. Nothing about Iran has been resolved, just paused and restarted a few times now. Picton's "Groundhog Day" line is worth taking at face value, the market's been trained to predict the cycle, and until it actually breaks, WTI keeps finding bids on dips no matter what OPEC+ does with supply.

Gold at $4,050 fits that picture. It's not choosing a side. Strong US data and Fed bets pull it one way, Iran risk and yen chaos pull it the other. For now it just sits there.

What Traders Should Watch

Friday's NFP - A beat above 83,000 backs the hawkish-Fed case and could push the yen right back against the intervention.

Actual Iran-US talks - Not Trump's claims. A confirmed meeting on the calendar, not another headline.

Japan's tax funding details - Vague now. What gets named in the coming weeks decides whether this becomes a real yen drag.

USD/JPY - Whether it holds around 157.40 or breaks back toward 160 tests, how real "won't hesitate to act again" actually is.

XAU/USD - Watch whether it holds the $4,030 to $4,050 zone. That range decides which story wins this week.

The Bottom Line USD/JPY is the trade to watch. Strong PMI wants dollar strength. Joint intervention is not so fast, at least against the yen. Friday's jobs number settles the argument or doesn't, and this drags into next week.

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 August 4, 2026  |  This report is for informational purposes only and does not constitute financial advice. © 2026 Followme News

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