The USD/JPY currency pair has sustained its upward trajectory for the second consecutive session, reaching around 150.30 during the European trading session on Monday. The Japanese Yen (JPY) encountered challenges following remarks by Bank of Japan (BoJ) Governor Kazuo Ueda on Friday, where he expressed skepticism about the feasibility of Japanese inflation achieving the 2% target. With diminishing inflationary pressures, speculation arises about the potential postponement of the BoJ’s plans for monetary policy tightening.
Contrastingly, reports from Japan’s Kyodo News agency suggest that the government is contemplating officially declaring an end to deflation, signaling an increased likelihood of policy tightening. A conclusive decision on this matter hinges on the assessment of the annual labor-management wage talks scheduled for March 13 and a thorough consideration of the outlook for price trends.
Meanwhile, the US Dollar Index (DXY) remains relatively stable around 103.80, seeking direction amidst improved US Treasury yields. Despite this stability, the USD faced some pressure following lackluster February manufacturing figures from the United States.
The US ISM Manufacturing PMI declined to 47.8 from 49.1, falling well below the market’s anticipation of 49.5. Furthermore, the US Michigan Consumer Sentiment Index dropped to 76.9 in February, missing the expected level of 79.6. Despite these concerning indicators, Federal Reserve (Fed) officials have not indicated an immediate inclination towards interest rate cuts, providing some support to the USD.
Investors are attentively monitoring forthcoming economic releases, including the ISM Services PMI, ADP Employment Change, and Nonfarm Payrolls for February, to gauge the overall health of the US economy and potential Fed policy decisions. Additionally, Federal Reserve Chair Jerome Powell’s speeches scheduled for Wednesday and Thursday are awaited for further insights into the central bank‘s monetary policy stance.
