USD/JPY advances to near 147.50, upside capped by BoJ hawkish signals
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USD/JPY could weaken as BoJ Governor Ueda expressed optimism that conditions for another rate hike are coming into place.
The US Dollar may struggle as expectations grow for a Federal Reserve interest rate cut in September.
Fed Chair Powell stated that risks to the labor market are increasing, while also noting that inflation remains a concern.
USD/JPY appreciates after registering around 1% losses in the previous session, trading around 147.40 during the Asian hours on Monday. However, the upside of the pair could be limited as the Japanese Yen (JPY) may regain ground after hawkish comments from the Bank of Japan (BoJ) Governor Kazuo Ueda at the Jackson Hole symposium on Saturday.
BoJ Governor Ueda signaled his optimism that conditions for another interest rate hike were taking shape. He stated that wage hikes are spreading from large enterprises to small and medium enterprises and are likely to keep accelerating due to a tightening job market, per Reuters.
Additionally, data released on Friday showed that Japan’s core inflation slowed for a second consecutive month in July but remained above the Bank of Japan’s 2% target, sustaining market expectations of another rate hike in the coming months. The nationwide core consumer price index (CPI), which excludes fresh food, rose 3.1% year-on-year in July, slightly above the median forecast of 3.0%.
The USD/JPY pair may lose its ground as the US Dollar (USD) may face challenges due to the rising likelihood of a Federal Reserve (Fed) interest rate cut in September, driven by the comments from Fed Chair Jerome Powell at the Jackson Hole symposium on Friday.
The Fed Chair Powell stated that risks to the job market were growing, but also said that inflation remained a threat and that a decision wasn't set in stone. Powell further stated that the Federal Reserve still believes it may not need to tighten policy solely based on uncertain estimates that employment may be beyond its maximum sustainable level.
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