The Japanese Yen (JPY) extends its losses for the second consecutive day on Wednesday, amplifying overnight declines and pushing the USD/JPY pair towards the mid-142.00s, marking a multi-day high during the early European session. Despite fragile market sentiment fueled by weak economic data from China and a recent devastating earthquake in Japan, the safe-haven JPY fails to find support.
Key Factors Influencing the JPY:
Global Economic Concerns: The JPY faces headwinds amidst concerns over weak economic data from China and the aftermath of a destructive earthquake in Japan. Despite being a traditional safe-haven currency, the JPY is not finding support in the current market conditions.
Policy Divergence Anticipation: Expectations of a reversal in policy divergence between the Bank of Japan (BoJ) and the Federal Reserve (Fed) in 2024 are impacting the JPY. The BoJ is anticipated to move away from its ultra-loose monetary policy, while the Fed is expected to implement a series of interest rate cuts throughout the year.
USD/JPY Dynamics: The USD/JPY pair is under the influence of these policy expectations, acting as a headwind for the JPY. However, traders may exercise caution in placing aggressive bets due to uncertainties regarding early interest rate cuts by the US central bank.
Upcoming Events and Market Focus:
FOMC Meeting Minutes: Traders are closely monitoring the release of the Federal Open Market Committee (FOMC) meeting minutes for cues about the Fed’s future policy moves. The minutes are expected to guide the next directional move for the US Dollar.
US Economic Data: The release of the US ISM Manufacturing PMI and JOLTS Job Openings data on Wednesday will provide further trading opportunities around the USD/JPY pair.
