During the early hours of Asian trading on Tuesday, the USD/JPY pair demonstrated strength, trading around 154.10. This upward movement is attributed to the US Dollar‘s modest rebound to 105.10 following a bounce from three-week lows. Market attention is focused on the upcoming speech by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis.
Last week’s lackluster US Nonfarm Payrolls (NFP) and Services PMI reports have fueled expectations of potential interest rate cuts by the Federal Reserve later this year. Traders anticipate a commencement of rate reductions as early as the September meeting. However, Fed Governor Michelle Bowman’s recent remarks hinted at a willingness to raise interest rates should inflation not progress towards the 2% target or shows signs of reversal.
Richmond Fed President Thomas Barkin, addressing concerns on Monday, highlighted the absence of evidence indicating inflation is on a trajectory towards the desired level. Barkin emphasized that the robustness of the job market provides officials with time to assess and gain confidence in the trajectory of inflation. Echoing similar sentiments, New York Fed President John Williams suggested an eventual implementation of rate cuts, citing a moderation in job growth and the Fed’s comprehensive evaluation of economic indicators. Investors are keenly observing further statements from Federal Reserve officials this week, anticipating a dovish tone which could potentially exert downward pressure on the US Dollar against its counterparts.
In contrast, the Japanese Yen faces headwinds as the risk-on sentiment persists, diminishing the appeal of safe-haven assets. Earlier today, Masato Kanda, Japan’s top currency diplomat, hinted at possible measures by Japanese authorities to address excessive market volatility. However, Kanda refrained from commenting on US Treasury Secretary Janet Yellen’s recent statements regarding FX policy. Notably, there were indications of potential intervention from the Japanese government last Friday following the release of disappointing April US jobs data.
