Japanese Yen Talking Points
USD/JPY holds a narrow range following the lackluster U.S. Non-Farm Payrolls (NFP) report[1], but fresh comments from Federal Reserve officials may sway the near-term outlook for the dollar-yen[2] exchange rate as the central bank appears to be on course to further normalize monetary policy over the coming months.
USD/JPY Outlook Hinges on Fed Chairman Powell Testimony
Even though New York Fed President John Williams and Atlanta Fed President Raphael Bostic, both voting members on the 2018-FOMC, are scheduled to speak over the coming days, the semi-annual Humphrey-Hawkins testimony may sway the near-term outlook for USD/JPY as Chairman Jerome Powell is slated to appear in front of Congress.
Chairman Powell may continue to strike a hawkish tone as Fed officials‘generally judged that, with the economy already very strong and inflation expected to run at 2 percent on a sustained basis over the medium term, it would likely be appropriate to continue gradually raising the target range for the federal funds rate to a setting that was at or somewhat above their estimates of its longer-run level by 2019 or 2020,’ and the central bank head may prepare U.S. lawmakers for a less accommodative stance as ‘incoming data suggested that GDP growth strengthened in the second quarter of this year.’
In turn, indications of higher borrowing-costs may prop up USD/JPY as Fed Fund Futures highlight budding expectations for four rate-hikes in 2018, but a batch of cautious remarks may dampen the appeal of the dollar as Chairman Powell & Co. warn thatthe ‘uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could
