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USD/JPY extends its winning spell above 151.00 amid a recovery in the US Dollar.
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Jerome Powell may highlight the need for ‘higher for longer’ interest rates.
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BoJ Ueda warned about the consequences of exiting from an easy policy stance on financial institutions.
The USD/JPY pair continued its winning streak for the fourth trading session on Thursday. The asset extended upside above 151.00 as investors remained cautious ahead of a speech from Federal Reserve (Fed) Chair Jerome Powell.
S&P500 futures trade bearish in the European session amid caution ahead of Fed Powell’s speech. The US dollar index (DXY) rebounded after rallying around 105.50 amid expectations that Fed Powell could leave the door open for further policy tightening.
Jerome Powell may highlight the need for interest rates to stay ‘longer’ as consumer inflation expectations remain stubbornly buoyed by a stable jobs market and strong consumer spending. Apart from interest rate guidance, the outlook will focus on economic performance. Powell could cite the ‘rate low’ narrative as ‘absurd’ due to continued inflationary pressures.
Meanwhile, Philadelphia Fed President Patrick Harker said in a statement that the central bank’s next decision will depend heavily on economic data. Fed Harker sees the unemployment rate rising to 4.5% in 2024 and inflation rising to 3% in 2024 before falling.
The Japanese yen has weakened against the U.S. dollar as wage growth in Japan has slowed, which has dampened consumer spending. A steady wage increase is a key requirement to exit the Bank of Japan’s (BoJ) ultra-loose monetary policy.
BoJ Ueda warned that the central bank must be very careful when exiting an easy policy stance as it would significantly affect financial institutions, borrowers and aggregate demand.
USD/JPY
