JPY softens ahead of BoJ policy decision – Scotiabank

FXStreet Insights Team FXStreet

The Japanese Yen (JPY) is slightly weaker versus the US Dollar (USD), underperforming most G10 currencies, as markets await next week’s BoJ meeting where a 25bps rate hike is widely expected. Policymakers signal the potential for further tightening in 2026, keeping USD/JPY range-bound between 154 and 157, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD/JPY stays range-bound amid hawkish BoJ signals

"The yen is entering Friday’s NA session with a 0.2% decline vs. the USD and underperformance against all of the G10 currencies with the exception of the Skandies SEK and NOK."

"Reports of a constructive, hawkish shift at the BoJ have failed to deliver strength—so far—with media suggesting that policymakers are expecting an extension of the tightening cycle beyond 0.75%. Next week’s BoJ policy decision is widely expected to deliver a 25bpt hike, to 0.75%, and policymakers appear to be paving the way for further tightening in 2026."

"We are neutral USD/JPY awaiting a break of the recent range bound between the mid-154 and upper-157 areas."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD extends the drop to 1.3360

GBP/USD builds on Monday’s decline and briefly clinches five-day lows near 1.3360 on Tuesday. Cable’s extra pullback follows the better tone in the Greenback as uncertainty in the Middle East prompts investors to adopt a cautious stance. Meanwhile, an apathetic UK labour market report also collaborates with the selling pressure on the British Pound.

EUR/USD stays offered just above 1.1400

EUR/USD keeps the downtrend well in place for yet another day, challenging the 1.1400 contention zone on Tuesday. The continuation of the selling impulse in spot comes amid decent gains in the US Dollar, which continues to find support in the persistent effervescence surrounding the US-Iran crisis.

Gold hits one-week high, near $4,100 as bulls shrug off Fed hike bets and firmer USD

Gold advances to an over one-week high during the Asian session on Wednesday, with bulls now awaiting a move beyond $4,100 before positioning for additional gains. However, concerns about energy-driven inflation risks continue to fuel Fed rate-hike bets and act as a tailwind for the US Dollar amid escalating US-Iran tensions, which, in turn, could cap the bullion.

XRP rebounds on rising on-chain activity

Ripple (XRP) ticks up and trades around $1.13 at the time of writing on Tuesday. This rebound aligns with a broader recovery in the cryptocurrency market, attributed to reports that mediators between the United States (US) and Iran are seeking a 10-day cessation of strikes to find a way back to the signed Memorandum of Understanding (MoU).

The Iranian war has again risen

The Iranian war has again risen to the top of the economics factor list. There is no end in sight. Intelligence experts say the current level of offense/retaliation will not change minds in Tehran, while in Washington, Trump fears all-out war, which would mean boots on the ground.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.