The USD/JPY currency pair is trading defensively around 144.50 during Thursday’s Asian session, pressured by recent dovish comments from Federal Reserve (Fed) officials. Investors are closely watching for the second estimate of US Gross Domestic Product (GDP) growth for the second quarter, which is projected to show a 2.8% increase.
Bank of Japan (BoJ) Deputy Governor Ryozo Himino signaled on Wednesday that the central bank would continue to raise interest rates if inflation trends persist, while also monitoring financial market conditions closely. His remarks align with those of BoJ Governor Kazuo Ueda, who indicated last week that recent market fluctuations would not affect the BoJ’s long-term rate hike strategy. According to a Reuters poll, most economists anticipate another rate hike from the BoJ later this year, with December being the more likely timeframe over October.
Conversely, the US Dollar (USD) has been weighed down by dovish statements from the US central bank. Fed Chair Jerome Powell noted that “the time has come for policy to adjust,” leading markets to fully anticipate a 25 basis point rate cut in September. The probability of a deeper rate cut is currently estimated at 36.5%, according to the CME FedWatch Tool.
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