- he Japanese Yen draws some support from reviving bets for an eventual BoJ policy pivot.
- The looming US government shutdown undermines the USD and seems to cap USD/JPY.
- The Prelim US Q4 GDP could provide some impetus ahead of the PCE Price Index on Thursday.
The Japanese Yen (JPY) registered modest gains against its American counterpart on Tuesday and was underpinned by slightly stronger-than-expected domestic consumer inflation figures. In fact, Japan’s core CPI exceeded forecasts and revived bets that the Bank of Japan (BoJ) might end negative interest rates soon, which, in turn, provided a goodish lift to the JPY. The uptick, however, lacked bullish conviction amid expectations that a recession in Japan might force the BoJ to delay its plans to tighten monetary policy. This, in turn, assisted the USD/JPY pair to attract some dip-buyers near the 150.00 psychological mark and hold steady during the Asian session on Wednesday.
Meanwhile, the US Dollar (USD) continues with its struggle to gain any meaningful traction amid the looming US government shutdown and weaker US Durable Goods Orders. The downside, however, remains cushioned in the wake of expectations that the Federal Reserve (Fed) will wait until the June policy meeting before cutting interest rates in the wake of still sticky inflation and a resilient US economy. Traders might also prefer to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday for cues about the Fed's rate cut path. This, in turn, caps the upside for the USD/JPY pair and warrants some caution before positioning for any further gains.
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