USD/JPY retreats from 156.40 as BoJ’s Ueda reiterates interest rate hike plans

USD/JPY gives back some of its early gains as BoJ’s Ueda remains stuck to his policy normalization plans.
A massive 7.6-magnitude earthquake in northeastern Japan weighed on the Japanese Yen.
The Fed is expected to cut interest rates by 25 bps on Wednesday.

Sagar Dua FXStreet

The USD/JPY pair gives up some of its intraday gains after posting an intraday high around 156.40 during the European trading session on Tuesday. Still, the pair is 0.12% higher at around 156.10.

The pair faces slight selling pressure as the Japanese Yen (JPY) attracts bids after comments from Bank of Japan (BoJ) Governor Kazuo Ueda signal that the central bank will stick to its policy normalization path, adding that inflationary pressure continues to accelerate.

“Because we are foreseeing convergence to 2% of the underlying component, we've been adjusting the degree of easing slowly,” Ueda said.

On Monday, investors turned slightly cautious over BoJ’s interest rate hike plans, following the release of the weaker-than-projected Japan Q3 Gross Domestic Product (GDP) data. Revised figures showed that the Japanese economy contracted at a faster pace of 0.6% against the preliminary estimate of 0.4%, a scenario that strengthens the case of Prime Minister Sanae Takaichi’s large fiscal spending plans, and undermines the scope of further monetary policy tightening.

Meanwhile, a massive 7.6-magnitude earthquake in northeastern Japan on Monday also put pressure on the Japanese Yen. The government has ordered households in the region to evacuate the city, while Japan’s Meteorological Agency (JMA) has also issued Tsunami warnings.

On the US Dollar (USD) front, investors await the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The major highlight of the Fed’s policy will be the Economic Projections report, as the central bank is widely anticipated to cut interest rates by 25 basis points (bps) to 3.50%-3.75%. The Fed is expected to attempt a delicate balancing act as the labor demand remains weak and price pressures have remained well above the 2% target for a longer period.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

British Pound weakens below 1.3450 as US-Iran uncertainty boosts safe-haven US Dollar

The GBP/USD pair loses ground to near 1.3425 during the early Asian session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar against the British Pound. All eyes will be on the US July jobs data, which is due later on Friday.

EUR/USD declines as US Dollar gains on Middle East uncertainty

EUR/USD remains subdued for the third successive day, trading around 1.1500 during the Asian hours on Tuesday. The pair continues to hold losses as the US Dollar finds support from ongoing uncertainty in the Middle East, despite lingering hopes for a diplomatic breakthrough between the United States and Iran.

Gold lacks bullish conviction amid US-Iran impasse, ahead of US jobs data

Gold is attempting a tepid bounce around $4,050 in Asian trading on Tuesday, stalling a two-day decline amid looming US-Iran risks, as markets brace for a slew of US jobs reports due later this week. US JOLTS Job Openings Survey is in focus on Tuesday.

Morgan Stanley cuts Circle price target to $38 as stablecoin growth stirs concerns

Circle (CRCL) shares came under pressure on Monday after Morgan Stanley downgraded the company to underweight and sharply cut its price target. Morgan Stanley lowered its price target for Circle to $38 from $106, citing concerns over slower growth in USDC circulation and increasing pressure on the stablecoin issuer's core revenue model.

NFP week: What awaits Bitcoin and Gold

This is an NFP week as markets brace for the release of a large influx of job market statistics. The data rollout begins with the JOLTS Job Openings report on Tuesday, continues with the ADP Employment report on Wednesday and Jobless claims on Thursday, and finishes with the Nonfarm Payrolls report on Friday.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.