USDJPY advances around 151.70 as the yield on US Treasury bonds rises.
During Monday’s Asian trading hours, the USDJPY pair is trading in positive territory for the sixth straight day. The pair’s rise is fueled by higher US Treasury bond yields and aggressive remarks from Federal Reserve (Fed) Chair Jerome Powell. The pair is presently trading at approximately 151.70, up 0.10% on the day.
The Federal Reserve (Fed) has reaffirmed that it will not hesitate to tighten policy. further, if necessary, to get inflation down to 2%. While the views of the other FOMC members remain flexible and open to further tightening if warranted by the evidence.
The University of Michigan’s Consumer Sentiment Index fell, although inflation forecasts rose.
On Friday, the preliminary University of Michigan Consumer Sentiment Index for November fell to 60.4 from 63.8 the previous month, falling short of the market consensus of 63.7. UoM 12-month inflation predictions have risen to 4.4% from 4.2%, while 5-year forecasts have risen to 3.2% from 3.0%.
This week’s focus will be on the US Consumer Price Index (CPI) and Japan’s growth figures.
Investors are looking for new momentum from the US inflation data due out on Friday. The stronger-than-expected numbers may increase the likelihood of Fed rate hikes at the December meeting. As a result, the US Dollar (USD) may rise, acting as a tailwind for the USDJPY pair. Fed Funds futures have priced in a 14.4% chance of further rate hikes. According to the CME Fedwatch Tool, the Fed will meet in December.
On the other hand, a hypothetical FX intervention by the Japanese government could limit the pair’s upside. Last week, Bank of Japan (BoJ) Governor Kazuo Ueda stated that the Bank of Japan (BoJ) would depart ultra-loose monetary policy with caution in order to avoid severe volatility in the bond market. He went on to say that Japan was moving closer to the central bank’s 2% inflation objective, with a cycle of rising wages and domestic demand-driven inflation picking up speed.
On Tuesday, market participants will be watching the US Consumer Price Index (CPI) for October. The Japanese Gross Domestic Product (GDP) for the third quarter (Q3) will be revealed on Wednesday, and it is predicted to fall 0.1%.QoQ from the prior reading’s 1.2% expansion. The US Retail Sales and Producer Price Index (PPI) will also be released. Traders will use these numbers to identify trade opportunities in the USDJPY pair.
