USD/JPY jumps to near 148.30 as Fed Powell’s caution on rate cuts boosts US Dollar

• USD/JPY climbs to near 148.30 as Fed’s Powell didn’t endorse aggressive dovish stance.

• Fed’s Powell warns of slowing job demand and upside inflation risks.

• Japan’s Jibun Bank Manufacturing PMI declines at a faster pace in September.

The USD/JPY pair trades 0.45% higher to near 148.30 during the European trading session on Wednesday. The pair gains sharply as the US Dollar (USD) outperforms a majority of its peers, following comments from Federal Reserve (Fed) Chair Jerome Powell that the central bank needs to be cautious on further interest rate cuts.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises almost 0.4% to near 97.60. The USD Index resumes its upside journey after a two-day corrective move.

On Tuesday, Fed’s Powell stated at the Greater Providence Chamber of Commerce that the upside inflation risks and labor market concerns have posed a challenging situation for the central bank, which is prompting officials to exercise caution on further monetary policy easing. Powell also stated that the current interest rate range is “well positioned to respond to potential economic developments”.

Fed Powell’s comments were similar to statements from Federal Open Market Committee (FOMC) members St. Louis Fed President Alberto Musalem, Atlanta Fed President Raphael Bostic, and Cleveland Fed President Beth Hammack who stated on Monday that the central bank needs to cautious over unwinding monetary policy restrictiveness further, citing persistent inflation risks.

Going forward, investors will focus on the US Durable Goods Orders and Personal Consumption Expenditure Price Index (PCE) data for August, which will be released on Thursday and Friday, respectively.

In Japan, the manufacturing business activity has declined again in September. Preliminary Jibun Bank Manufacturing PMI data came in lower at 48.4 against 49.7 in August. Economists had anticipated the Manufacturing PMI to have expanded this month to 50.2. The Services PMI grew at a moderate pace to 53.0 from the prior reading of 53.1.