Japanese yen is the best performing G10 currency today, with USDJPY pulling back below the 146.00 mark. This comes after BoJ Governor Ueda took part in a special parliamentary session, during which recent BoJ policy moves were discussed.
While Ueda said that real rates are likely to remain negative and easy financial conditions will continue to support the economy, he also made some hawkish mentions. BoJ Governor said that if the Bank is able to confirm that prices and economy will be in-line with forecasts, BoJ will continue to adjust the degree of easing. This leaves the door open to more tightening, but also signals that the Bank is in no rush to hike rates and will take a cautious approach. Money markets are expecting Bank of Japan to stay on hold at September meeting, but also see a 50-50 chance of a rate hike being delivered at 2024 final meeting in December.
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Open account Try demo Download mobile app Download mobile appUeda's appearance before lawmakers was noteworthy, but the main event of the day, however, is yet to come. Fed Chair Powell will deliver his Jackson Hole symposium speech at 3:00 pm BST today. There is an expectation that he will hint at the first rate cut of a cycle being delivered in September. Such a move is priced in by money markets, and given the inflation has fallen considerably, and labor market has cooled, there is a basis for cutting rates. However, failure to acknowledge that easing is imminent may lead to a hawkish reaction in the markets, with USD gaining.
Taking a look at USDJPY chart at H1 interval, we can see that the pair failed to break above the 146.50 resistance zone yesterday and dropped back below 146.00 mark today. However, the pullback was halted at the 145.40 support zone. Trader should expected elevated volatility on the pair during Powell's speech at 3:00 pm BST.
Source: xStation5
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