No significant events expected today.
The USD/JPY pair attracts some sellers around 154.15 in the early hours of Asian trading on Friday. Risk-off sentiments and rising tensions between Israel and Iran enhance safe-haven flows, benefiting the Japanese yen (JPY). However, strong US economic data and any aggressive comments from Federal Reserve officials may limit the pair’s rise in the near term. The Bank of Japan (BoJ) is expected to hold a meeting next week and revise its inflation forecast for this fiscal year in the quarterly report.
Inflation in Japan slowed in March but remains above the central bank’s target level of 2%, the Japanese Statistics Bureau reported on Friday. The core Consumer Price Index (CPI) for March rose 2.7% year-on-year, following a 2.8% increase in February. Core CPI, excluding fresh food, rose 2.6% y/y in March, compared to a 2.8% rise in February, below the market consensus forecast of 2.7%.
On Thursday, Bank of Japan Governor Kazuo Ueda stated that the Japanese central bank might raise interest rates again if the yen’s depreciation significantly boosts inflation. Ueda added that currency rate movements could influence the timing of the next policy change.
Meanwhile, Bank of Japan board member Asahi Noguchi stated on Thursday that “the main scenario is that any future rate hike will likely be slow, but it depends on the economic data.” Noguchi noted that “the main focus now is on how quickly the rate will be adjusted and at what level it will eventually stabilize.” Uncertainty regarding the future path of the Bank of Japan’s rate hikes continues to pressure the yen.
Nevertheless, the conflict between Israel and Iran has raised fears of a war in the Middle East. On Friday, Prime Minister Benjamin Netanyahu stated that Israel would make “its own decisions” in response to unprecedented Iranian airstrikes over the weekend, according to CNN. Additionally, the Taiwanese Ministry of Defense reported that four Chinese military aircraft crossed the median line of the Taiwan Strait in the last 24 hours. The escalation of geopolitical tensions in the Middle East and Asia could foster the rise of safe assets such as the yen and create headwinds for the USD/JPY pair.
As for the dollar, investors are betting that the US Federal Reserve will delay rate cuts until September. Atlanta Fed President Raphael Bostic stated that inflation in the US is too high and the Fed still has work to do, while New York Fed President John Williams emphasized that the Fed is data-dependent, and he does not feel an urgency to cut rates.
Recommendations: Predominantly trade on Buy from current price levels.