USD/JPY retreats from intraday high while treading water around 133.80 as Tokyo opens on Monday. In doing so, the Yen pair fails to extend the previous day’s run-up amid sluggish markets ahead of this week’s top-tier data/events. Not only a lack of major data/events but mixed catalysts and sluggish yields also challenge the USD/JPY pair traders of late.

USD/JPY rose the most in a week the previous day as mostly upbeat US data pushed back hopes of the Federal Reserve’s (Fed) policy pivot, as well as the rate cuts, in 2023. That said, US Retail Sales dropped by 1.0% for March versus -0.4% expected and -0.2% prior. On the contrary, Industrial Production grew by 0.4% during the stated month compared to 0.2% market forecasts and prior reading. Additionally positive was the preliminary reading of the University of Michigan's (UoM) Consumer Confidence Index for April which improved to 63.5 versus 62.0 analysts’ expectations and previous readings. Furthermore, Year-ahead inflation expectations rose from 3.6% in March to 4.6% in April while its Five-year counterpart reprinted 2.9% for the said month.

Hawkish Fed talks also contributed to the USD/JPY pair’s previous run-up. “The recent developments are consistent with one more rate hike,” said Atlanta Federal Reserve (Fed) President, Raphael Bostic in an interview with Reuters this Friday. On the same, Fed Governor Christopher Waller mentioned that the recent data show that the Fed hasn't made much progress on its inflation goal and added that rates need to rise further, per Reuters. However, Federal Reserve Bank of Chicago President Austan Goolsbee said in an interview with CNBC on Friday that he still wants to see the data. The policymaker also added, “But let's be mindful we've raised a lot; some of the lag is coming through possibly in today's retail sales number."

On the other hand, Bank of Japan’s (BoJ) new Governor Kazuo Ueda defends the Japanese central bank’s easy-money policy and allowed the USD/JPY pair to remain firmer.

Recently, the geopolitical challenges emanating from China, due to its eagerness to collaborate with Russia on global and regional security, as well as tussles with the US over Taiwan, prod the market sentiment and weigh on the USD/JPY pair.

Amid these plays, S&P 500 Futures struggle for clear directions after Wall Street’s downbeat closing whereas the bond yields remain sidelined after posting the weekly gains.

Looking forward, the preliminary readings of the US PMIs for April and Japan’s National Consumer Price Index (CPI) for March will be important to watch for clear directions. Also important are the aforementioned risk catalysts and central bankers’ comments.