Japanese yen struggles to benefit from Tuesday’s Tokyo CPI-inspired rises.

On Wednesday, the Japanese Yen (JPY) traded higher versus the US dollar for the second day in a row. Although the upside was limited due to Uncertainties regarding the Bank of Japan’s (BoJ) policy outlook. A spike in Consumer prices in Tokyo, Japan’s capital city. Reignited Speculation about an Impending shift in the BoJ’s Monetary stance.

The BoJ policy uncertainty is preventing JPY bulls from placing new wagers.

However, an unanticipated recession in Japan may force the BoJ to delay its strategy to pivot away. From the really simple policy settings. This, in turn, is discouraging bulls from initiating aggressive bets. Albeit a lower risk tone may continue to function as a tailwind for the safe-haven JPY.

Japanese yen is being held down by subdued price action ahead of US data and Powell’s speech.

The US Dollar (USD), on the other hand, continues to struggle to find real traction. Hovering near a one-and-a-half-week low hit in the aftermath of Tuesday’s poor US macro data. The growing agreement that the Federal Reserve (Fed) will begin decreasing interest rates in June. Proves to be a major factor eroding the Greenback. The downside remains muted ahead of Fed Chair Jerome Powell’s congressional hearing. Which will be watched for clues regarding the rate-cutting path. Aside from this, the US macro statistics – the ADP report on the private sector.
Employment and JOLTS Job Openings   may influence the USD. And create short term trading opportunities in the USDJPY pair.

Daily Market Movers: Japanese Yen stays on the front foot on bets of an imminent BoJ policy move.

Data released on Tuesday revealed that the Tokyo CPI recovered from a 22 month low in February. Reigniting speculation that the Bank of Japan could soon abandon the negative interest rate regime. Supporting the Japanese yen.
Furthermore, investors appear to believe that another large pay increase this year will allow the Bank of Japan to discontinue its ultra loose policy settings in the coming months. Which, together with the risk-off impulse, benefited the JPY.
The BoJ, however, is unlikely to rush into a rate hike and may wait until the June policy. Meeting before tightening, particularly after two consecutive quarters of economic decline that resulted in a technical recession.

BoJ is set to lower its forecast for consumption and factory output this month.

According to insiders, the BoJ is set to lower its forecast for consumption and factory output this month, citing signs of weakening in the economy that highlight the fragile status of the recovery.
The US Dollar was weakened by Tuesday’s disappointing announcement of the US ISM Services PMI, which revealed that growth in the non-manufacturing sector slowed slightly in February due to a fall in employment.
The markets, however, are still pricing in the potential of the Federal Reserve’s first interest rate cut in June, which helps limit the drop in US Treasury bond yields and acts as a tailwind for the currency.
Traders also appear hesitant to make large directional bets and wait to Fed Chair Jerome Powell’s congressional testimony. For new clues regarding the rate-cutting path, which should add some momentum to the USD.
Aside from that, Wednesday’s release of the ADP report on private-sector employment and the JOLTS Job Openings data should help to generate short term trading opportunities around the Japanese yen pairing.