Despite the remarks made by Japan’s Finance Minister Shunichi Suzuki, the USD/JPY is maintaining its earlier gains and is testing 156.50. The US dollar and US Treasury bond yields have increased, and the Fed has taken a more cautious approach to policy and inflation, which has kept the pair sustained.
The EUR/USD pair continues to rise, reaching 156.00 during Friday’s European trading session. Despite an anticipated drop in the US Consumer Price Index (CPI) data for April, the Federal Reserve (Fed) disregarded predictions of rate cuts, which caused the US Dollar to surge sharply and boost the asset.
According to the statement released by Fed policymakers on Thursday, a single decrease in consumer price inflation is enough to signal a shift in the general trend. John Williams, the president of the New York Fed Bank, stated that he does not currently see any economic indicators indicating the need to alter monetary policy. Williams stated, “In the very near term, I don’t expect to get that greater confidence that we need to see on inflation progress towards a 2% goal,” in response to a question regarding the inflation outlook, according to Reuters.
The US dollar and bond yields are benefiting from the Fed’s restrictive interest rate policy for an extended length of time. The US Dollar Index (DXY) increased to 104.70, tracking the value of the US dollar relative to six major world currencies. The US Treasury 10-year yield is at 4.39%.
As for the Fed lowering interest rates starting with the September meeting, that rumor is still very much alive. According to the CME FedWatch tool, there is a 68% chance that interest rates will drop from their current levels in September. This is a decrease from the 73% chance that was observed following the announcement of the weaker inflation data.
On the Japanese front, the Bank of Japan (BoJ) is facing new difficulties in pursuing its goal of tightening monetary policy as a result of the disappointing GDP figures for the first quarter. The 0.4% prediction for the Japanese economy’s contraction was exceeded by a 0.5% contraction.
