In European Trading, USD/JPY trims some intraday losses, yet negative momentum persists.
In the midst of improved strength in the US Dollar (USD) and weakened US Treasury yields, the USD/JPY pair witnessed a partial recovery from intraday losses on Friday. However, despite this uptick, the currency pair continues its four-day losing streak, hovering around 147.90 during European trading hours.
As of the latest report, the weekly depreciation of the US Dollar against the Japanese Yen stands at approximately 1.50%. Analysts attribute this decline to the prevailing optimism surrounding expectations that the Federal Reserve (Fed) might initiate a rate-cut cycle, potentially commencing in June. According to the CME FedWatch Tool, there is a 56.7% probability of a 25 basis point rate cut in June. Federal Reserve Chair Jerome Powell further fueled speculation during his testimony before the US Congress, hinting at the possibility of interest rate cuts later in the year.
Adding to the economic discourse, Cleveland Fed President Loretta Mester expressed concerns about the potential persistence of inflation throughout the year. Mester noted that if economic conditions align with forecasts, there might be a likelihood of rate cuts later in 2024.
The Japanese Yen (JPY) witnessed a boost in response to growing speculation that the Bank of Japan (BoJ) may shift away from its ultra-loose monetary policy stance, contributing to the weakness in the USD/JPY pair. BoJ Governor Kazuo Ueda stated that it is “fully possible to seek an exit from stimulus while striving to achieve the 2% inflation target.”
Governor Ueda also emphasized that the extent of rate hikes would depend on prevailing circumstances if negative rates are lifted. Additionally, BoJ policy board member Junko Nakagawa suggested that the likelihood of achieving the 2% inflation target sustainably is gradually improving.
In economic data, Japan’s non-seasonally adjusted Current Account Surplus for January decreased to ¥438.2B from the previous figure of ¥744.3B. Despite the decline, the surplus surpassed expectations, reaching ¥330.4B, potentially providing some support for the Japanese Yen. Meanwhile, market participants eagerly await US employment data, including Average Hourly Earnings and Nonfarm Payrolls, seeking further insights into the economic situation in the United States.
