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Even as the BoJ vs. Fed Difference Regains Focus, USD/JPY Tracks On Lackluster Yields Below 134.00
In the recent period, the USD/JPY has been unable to maintain its intraday high. Yields continue to rise as Fed conversations and generally stronger US data counter dovish Fed leaning. BoJ's Ueda supports the easy money policy and gives Yen purchasers control of the situation. US PMIs and Japanese inflation are watched for new peaks.
As Tokyo starts on Monday, USD/JPY declines from its intraday peak and remains stable around 133.80. As a result, the Yen pair falls short of extending the run-up from the previous day due to lax markets ahead of this week's major data/events. Along with a dearth of significant data or events, the USD/JPY pair traders have recently faced difficulties from inconsistent triggers and slow yields.
The previous day, USD/JPY increased to its highest level in a week as largely positive US data dampened expectations for the Federal Reserve's (Fed) policy shift and rate reduction in 2023. In spite of this, US retail sales decreased by 1.0% in March compared to -0.4% predicted and -0.2% in February. Contrarily, Industrial Production increased by 0.4% in the month in question as opposed to the 0.2% market consensus and preceding reading. The preliminary result for April of the University of Michigan's (UoM) Consumer Confidence Index, which increased to 63.5 from 62.0 analysts' estimates and prior readings, was also encouraging. In addition, year-ahead inflation forecasts increased from 3.6% in March to 4.6% in April, while their 5-year counterparts showed a decrease of 2.9% for the same month.
The USD/JPY pair previously increased due to hawkish Fed discussions. Raphael Bostic, president of the Atlanta Federal Reserve (Fed), stated in a Friday interview with Reuters that "recent developments are consistent with one more rate hike." According to Reuters, Fed Governor Christopher Waller discussed this topic and said that more rate increases are necessary because recent data indicate that the Fed hasn't made much headway toward its inflation target. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated that he still needs to examine the statistics in an interview with CNBC on Friday. The legislator said, "But let's be mindful we've raised a lot; some of the lag is possibly coming through in today's retail sales number."
On the other hand, the USD/JPY pair was able to remain stronger because to the Bank of Japan's (BoJ) new Governor Kazuo Ueda, who supports the Japanese central bank's easy-money policy.
Recent geopolitical tensions between China and the US over Taiwan and its desire to work with Russia to improve regional and global security have weighed on the USD/JPY pair and agitated the market.
S&P 500 Futures struggle to find a clear direction amid these bets following Wall Street's pessimistic ending, as bond yields stay on the sidelines despite registering weekly gains.
Looking ahead, it will be crucial to keep an eye on the preliminary readings of the US PMIs for April and the National Consumer Price Index (CPI) for Japan for March. The aforementioned risk drivers and central bankers' remarks are also significant.
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