Japanese Yen Talking Points
USD/JPY[1] remains under pressure as U.S. President Donald Trump tweets that ‘tariffs are the greatest,’ and the exchange rate may exhibit a more bearish behavior ahead of the next Federal Open Market Committee (FOMC) interest rate decision on August 1 as the central bank is widely expected to keep the benchmark interest rate on hold.
Bearish USD/JPY Behavior Takes Shape Ahead of U.S. GDP, FOMC Meeting
Recent remarks from the U.S. president has swayed the near-term outlook for USD/JPY as the leader warns that a strong dollar is ‘taking away’ the competitive advantage of the U.S. economy[2],’ and a comments surrounding the conduct of monetary policy may continue to impact the exchange rate as it undermines the independence of the Federal Reserve.
In response, the FOMC[3] may continue to prepare U.S. households and businesses for higher borrowing-costs as Fed Fund Futures continue to price a greater than 80% probability for a move in September, and fresh data prints coming out of the economy may keep the central bank on course to implement four rate-hikes this year as the 2Q Gross Domestic Product (GDP) report is anticipated to show the growth rate expanding 4.2% per annum, which would mark the highest reading since 2014.
Signs of a more robust economy may encourage Chairman Jerome Powell & Co. to retain a hawkish outlook as the committee largely achieves its dual mandate for full-employment and price stability, and comments pointing to an imminent rate-hike may curb the recent pullback in USD/JPY as the Bank of Japan (BoJ) remains in no rush to abandon its Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control.
In turn, the
