Japanese Yen Talking Points
USD/JPY remains under pressure, with the Yen largely unfazed by the mixed data prints coming out of Japan, and the exchange rate may continue to consolidate ahead of the Federal Open Market Committee (FOMC) interest rate decision on June 13 as it initiates a fresh series of lower highs & lows.
USD/JPY Rate Vulnerable to Further Losses as Bearish Series Develops
Updates to Japan’s Gross Domestic Product (GDP) report should keep the Bank of Japan (BoJ) on track to further expand its balance sheet as the final reading shows a 0.6% contraction in the growth rate, and Governor Haruhiko Kuroda and Co. may carry the Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control into the year ahead as inflation continues to run below the 2% target,
However, the limited reaction to the fresh figures suggest USD/JPY will continue to take cues from Fed policy as the recent pullback coincides with the weakness in U.S. Treasury Yields, and the fresh updates from the Federal Open Market Committee (FOMC) is likely to impact the near-term outlook for dollar-yen[1] as especially as Chairman Jerome Powell and Co. pledge to phase out the forward-guidance for monetary policy.
Keep in mind, Fed Fund Futures are now showing narrowing expectations for four rate-hikes in 2018, with the benchmark interest rate seen ending the year around the 2.00% to 2.25% threshold, and more the same from the FOMC[2] may keep USD/JPY under pressure as market participants scale back bets for a more aggressive hiking-cycle.
With that said, little to no changes in the longer-run interest rate forecast (dot-plot) may dampen the appeal of the greenback, with USD/JPY at risk of exhibiting a more
