Japanese yen has maintained its relative outperformance in the face of hawkish BoJ expectations.

The Japanese yen (JPY) rose against the US dollar for the fifth day in a row on Thursday. As investors anticipate a shift in the Bank of Japan’s (BoJ) monetary stance. Even Wednesday’s less hawkish statements by BoJ board member Seiji Adachi who stated. That the economy had yet to reach a point where the central bank may intervene, were dovish.

The argument over the end of ultra-easy monetary policy had no impact on the underlying optimistic mood surrounding the JPY. Data released earlier today revealed that Japanese Retail Trade for October fell short of consensus expectations. However this was offset by an upward revision of the previous month’s reading and better-than-expected Industrial Production figures.

Bets on the Fed cutting interest rates in 2024 weaken the USD and weigh on the USDJPY.

The US Dollar (USD), on the other hand, is struggling to capitalize on the overnight recovery from its lowest level since August 11. Which was prompted by an upbeat US GDP data showing. That the economy grew at a faster rate than previously projected for the third quarter. Investors are now confident that interest rates in the United States have peaked. And they have priced in the prospect that the Fed would begin to ease monetary policy.

As early as March 20, 2024. This is bolstered by a fresh decrease in US Treasury bond yields. Which continues to underpin the Greenback and keeps the USDJPY pair near a three-month low reached on Wednesday. Bearish traders, on the other hand, are not placing new bets ahead of the critical US inflation report.

Bears are cautious, looking for a new impetus from the US PCE Price Index later this Thursday.

The US Personal Consumption Expenditures (PCE) Price Index is set to be released later in the early North American session and will be scrutinized for evidence that inflation is reducing. This, in turn, will support dovish Fed forecasts, paving the way for the dollar and the USDJPY pair to depreciate more in the near term. In contrast, the initial reaction to a strong report is more likely to be restricted due to growing acceptance that the Fed has finished hiking interest rates.

Market Movers: The Japanese Yen consolidates recent advances to a multi-month high as traders anticipate US PCE data.

The Japanese Yen is supported by hawkish Bank of Japan forecasts, even though board member Seiji Adachi downplayed speculation about a policy move on Wednesday.

According to Adachi of the Bank of Japan, Japan has yet to witness a sufficiently embedded positive wage-inflation cycle, and it is acceptable to patiently continue the current easy policy.

Adachi noted that the BoJ will adopt additional easing measures if necessary, adding that the October move to make YCC flexible was not intended to set the framework for policy normalisation.

Japanese retail trade dipped 1.6% in October but increased by 4.2% year on year. The preceding month’s data was revised higher to reflect a 6.2% increase rather than the 5.8% reported.

Japanese industrial production increased by 1% in October, compared to a 0.5% increase the previous month and a 0.9% gain year on year.

The second estimate of US GDP revealed that the world’s largest economy grew at a 5.2% annualized rate. During the third quarter, up from 4.9% previously reported.

However, the positive US macro data was mainly overshadowed by additional dovish comments from Federal Reserve officials. Who confirmed expectations for a series of rate cuts in 2024.

Fed President Loretta Mester saw clear progress toward 2% inflation.

Cleveland Fed President Loretta Mester saw clear progress toward 2% inflation and stated. That monetary policy must be flexible in the current environment. Separately. Richmond Fed President Tom Barkin expects that inflation will be more resistant than desired and is unwilling to rule out another interest rate hike.

Rate futures markets in the United States are currently pricing in more than 100 basis points of rate reduction. Beginning in May of next year, and the yield on the rate sensitive two-year US government bond is at its lowest since July.

This keeps the US Dollar bulls on the defensive and puts pressure on the USDJPY pair. For the fifth consecutive day, ahead of the release of the US PCE Price Index on Thursday.