During the early European session on Wednesday, the USD/JPY pair lingered around 154.60, closely mirroring its recent peak at 154.78, a level last witnessed in June 1990. A corrective phase in the US Dollar (USD) exerted downward pressure on the USD/JPY pair. However, optimism regarding the Federal Reserve (Fed) maintaining elevated interest rates for an extended period, supported by a robust US economy and persistent inflation, served to counterbalance the downward trajectory.
Federal Reserve Chair Jerome Powell’s commentary during Tuesday’s Washington Forum likely bolstered the greenback. Powell’s observation of limited progress on inflation this year, coupled with expectations of a protracted timeline before reaching the 2% target, possibly contributed to a more hawkish stance, offering support to the US Dollar, as highlighted by Reuters.
On the opposing front, the Japanese Yen (JPY) found a foothold following Japan’s trade balance swinging to a surplus in March. The Merchandise Trade Balance Total improved to ¥366.5 billion, a notable upturn from the preceding deficit of ¥377.8 billion. Moreover, a private survey indicated a softening sentiment among Japanese manufacturers in April, attributed to a weaker Yen driving up import costs.
Additionally, the Japanese Yen could witness reinforcement from safe-haven inflows amidst prevailing risk aversion. Investor apprehension heightened following Iran’s air strike on Saturday, with Israel’s response under scrutiny. A Reuters report indicated the postponement of Israel’s war cabinet’s third meeting, originally slated for Tuesday, to Wednesday, as they deliberate on a course of action in response to Iran’s unprecedented direct attack.
Market participants eagerly anticipate the release of Japan’s National Consumer Price Index (CPI) data by the Statistics Bureau of Japan on Friday. Market sentiment suggests an anticipated moderation in Consumer Prices for March, with traders closely monitoring the outcome for potential market implications.
