- USD/JPY kick-starts Monday’s session on a flat note as uncertainty loom amid aggressive Fed.
- Soaring inflation and lower unemployment levels are indicating a jumbo rate hike from the Fed.
- The juggernaut fall in the Japanese yen found a pause on verbal intervention by Tokyo’s officials.
The USD/JPY pair has opened on a minor slip at around 128.38 on Monday after a range-bound week. The pair remained in consolidation in a narrow range of 127.46-129.40 last week despite progressive odds of a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed).
The testimony of Fed chair Jerome Powell on Thursday at the International Monetary Fund (IMF) meeting has advocated a jumbo rate hike in May to tame the soaring inflation, which is affecting the households’ living expenses. The story of a tantamount figure of 8.5% US inflation rate and consistency in full employment levels is demanding a quick reversion to neutral rates as the situation could shock the US economy.
Meanwhile, the negative market sentiment recorded on Friday is likely to be followed on Monday, which may underpin the mighty greenback. The US dollar index (DXY) is likely to sustain above the round level support of 101.00 on bolstering chances of hawkish guidance From Fed’s Powell in monetary policy next month.
On the Japanese yen front, the release of Japan’s National Consumer Price Index (CPI) at 1.2% is indicating a continuation of ultra-loose monetary policy. Printing National CPI below the targeted inflation rate of 2% doesn’t require a tight stance. It is worth noting that the plummet in the Japanese yen has witnessed a minor pause after a verbal intervention of Japanese Finance Minister Shunichi Suzuki. The Japanese official warned on Wednesday that the negative impact of the extremely weak yen would be much more on the economy rather than its constructive merit for exporters.