Based on the article “USD/JPY Builds Bullish Momentum Before U.S. CPI, Fed Speeches” by Mauro Orru, originally published by The Wall Street Journal, here’s a rewritten and expanded version of the original piece, extended to meet a minimum word count of 1,000 words and including bullet points where appropriate. Full credit is given to the original author.
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# USD/JPY Gains Strength Ahead of U.S. Economic Signals
By Mauro Orru | Adapted and Expanded from The Wall Street Journal
The U.S. dollar is showing renewed strength against the Japanese yen, marking a notable reversal from recent losses and solidifying a bullish trajectory as traders brace for key economic data from the United States. This rising momentum in the USD/JPY currency pair is intensifying ahead of the release of U.S. inflation data and a series of high-profile speeches by leading members of the Federal Reserve. These upcoming events are expected to provide crucial clues about the central bank’s monetary policy stance and interest rate path heading into the second half of 2024.
## Overview of Currency Market Dynamics
The foreign exchange market remains highly sensitive to developments in monetary policy across major economies. The pairing of the U.S. dollar and the Japanese yen is a particularly important and closely watched exchange rate within the FX market due to the macroeconomic fundamentals behind both currencies and the differing policy approaches of their central banks.
– The U.S. Federal Reserve has been managing a cycle of high interest rates to curb inflation.
– The Bank of Japan (BOJ), by contrast, has maintained ultra-loose monetary policies for years, only recently beginning to hint at tightening.
– These divergent monetary paths support the strength of the U.S. dollar against the yen, especially when U.S. Treasury yields rise.
As of late, the USD/JPY pair has been retracing upwards after a brief retreat. Investors are now recalibrating their expectations as key data points near.
## Key Drivers Strengthening the USD/JPY
There are several macroeconomic and geopolitical factors responsible for the increased bullish momentum behind the U.S. dollar against the yen.
### 1. Anticipation Around U.S. CPI Data
The upcoming release of the U.S. Consumer Price Index (CPI) is one of the most anticipated economic events this week. Scheduled for Wednesday, the report is expected to heavily influence expectations around future Federal Reserve rates.
– A hotter-than-expected inflation reading may reinforce concerns that the disinflation process in the U.S. has stalled.
– This would make it more likely for the Federal Reserve to maintain its higher interest rates for longer than previously expected.
– A strong CPI number often pushes U.S. Treasury yields higher, especially on the 10-year note, in turn increasing demand for the dollar and lifting USD/JPY.
Recent labor market data has already added to the hawkish sentiment among investors. The U.S. economy added more jobs in May than economists had forecast, a sign that wage growth and consumer demand could continue to exert upward pressure on inflation.
### 2. Federal Reserve Speeches Coming into Focus
The focus will also be on upcoming speeches from several influential members of the Federal Reserve, including Chair Jerome Powell.
– Powell’s comments will follow the Federal Open Market Committee’s (FOMC) two-day policy meeting, which concludes Wednesday.
– No change in interest rates is expected at this meeting, but the tone of remarks and the updated “dot plot” showing the interest rate outlook may lead to market repricing.
– Any indication that the Fed will maintain its higher-for-longer strategy could further embolden dollar bulls.
Market participants are particularly eager to see whether Powell and other FOMC members will update their earlier projections of three rate cuts in 2024. Given persistent inflation and a tight labor market, some analysts believe those cuts may now be reduced to one or even none this year.
### 3. Divergent Central Bank Policies
A major force driving USD/
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