The USD/JPY pair surged above 158.00 in the European session on Tuesday, driven by a strong US Dollar. The Fed’s decision to restrict rate cuts to only one this year has boosted the performance of the USD, with Philadelphia Fed Bank President Patrick Harker stating that he foresees only one cut if his economic forecast holds true. While financial markets anticipate two rate cuts by the end of the year, recent data showing a cooling inflation rate has fueled speculation for additional cuts.
Investors are eagerly awaiting the release of US Retail Sales data for May, with expectations of a 0.3% increase following a flat month in April. Despite concerns about soft inflation, Fed policymakers have emphasized the need for sustained declines in inflation before considering further rate cuts. The focus remains on economic data releases and the Fed’s stance on monetary policy moving forward.
On the other hand, the Japanese Yen is facing selling pressure as the Bank of Japan (BoJ) delays plans to reduce bond-buying operations until the July meeting. This delay has raised concerns about the limited scope for policy tightening in Japan. Investors will closely monitor Japan’s National Consumer Price Index (CPI) data for May, with expectations of an acceleration in the annual CPI excluding Fresh Food from 2.2% to 2.6%.
Overall, the USD/JPY pair’s movement above 158.00 reflects the strong performance of the US Dollar amidst Fed’s stance on rate cuts. While market speculation remains high for additional rate cuts, the focus is on upcoming economic data releases, including US Retail Sales and Japan’s National CPI. The delay in BoJ’s plans for reducing bond-buying operations has added to selling pressure on the Japanese Yen, further complicating the outlook for policy tightening in Japan. Investors will continue to monitor developments in both countries for further insights into the currency pair’s movement.
