- USD/JPY loses ground on speculation of Fed interest rate cuts in March.
- The better-than-expected Japan’s data might have supported the JPY.
- US Dollar faces challenges due to the downbeat US yields and improved risk appetite.
The USD/JPY pair experiences a downward trend as market confidence is restored, driven by expectations that the Federal Reserve will start implementing interest rate cuts in March. Currently, the probability of this scenario is priced at around 50:50, indicating uncertainty among market participants. The USD/JPY pair trades lower near 147.50 during the European session on Wednesday.
The Bank of Japan (BoJ) decided to maintain its current interest rates and yield curve control policy during its recent meeting on Tuesday. However, BoJ Governor Kazuo Ueda signaled a strong commitment to achieving the 2.0% inflation target. Ueda's remarks suggested that the conditions necessary for gradually phasing out extensive stimulus measures and moving short-term interest rates out of negative territory were aligning.
Additionally, the better-than-expected Japan’s Merchandise Trade Balance Total for December was released by the Ministry of Finance on Wednesday. The report printed the figure of ¥62.1B against the expected ¥-122.1B and the previous figure of ¥-780.4B. While Japanese Exports (YoY) rose to 9.8% from the previous decline of 0.2%. These improved readings might have provided support to underpinning the Japanese Yen (JPY), which in turn, acts as a headwind for the USD/JPY pair.
On the other side, the US Dollar faces challenges due to the downward movement in the bond market and improved risk appetite. The US Dollar Index (DXY) edges lower to near the 103.10 level with the 2-year and 10-year yields on US bond coupons standing at 4.32% and 4.10%, respectively, by the press time. Looking forward, market participants are expected to keenly observe the release of the S&P Global Purchasing Managers Index (PMI) data from the United States (US) scheduled for Wednesday.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD climbs above 1.1650 area on improving risk mood
EUR/USD extends its daily rally and trades above 1.1650 in the American session on Friday. The sharp decline seen in the 1-year Consumer Inflation Expectations component of the UoM Consumer Sentiment Index weighs on the US Dollar and helps the pair push higher.
GBP/USD rises above 1.3450 on USD weakness
GBP/USD gathers bullish momentum and trades above 1.3450 on Friday after struggling to find direction on Thursday. The positive shift seen in market mood and the pullback seen in US consumer inflation expectations hurt the US Dollar and support the pair heading into the weekend.
Gold extends daily recovery beyond $3,350
Gold gains traction on Friday and clings to daily gains above $3,350. Renewed US Dollar (USD) weakness and retreating US Treasury bond yields allow XAU/USD to edge higher, while the upbeat market mood limits the pair's upside.
Bitcoin nears all-time high, Ethereum eyes $4,000, Ripple sets new record
Bitcoin price is trading above $120,000 on Friday, inching closer to its all-time high of $123,218. Ethereum price has surged by over 20% so far this week, with bulls aiming for the $4,000 level next. Ripple has taken center stage, reaching a new record high of $3.66 on Friday, signaling renewed demand and optimism across the market.
China’s first-half growth remains on track, though activity data signals caution
China's second-quarter GDP beat forecasts again with a 5.2% year-on-year growth, driven by strong trade and industrial production. Yet sharper-than-expected slowdowns in fixed-asset investment and retail sales and falling property prices are a concern.
Best Brokers for EUR/USD Trading
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.