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Expectation that the Bank of Japan will conduct another interest rate hike

Expectation that the Bank of Japan will conduct another interest rate hike | 30 May 2024

30 May 2024, USD/JPY

Expectation that the Bank of Japan will conduct another interest rate hike

Events to pay attention to today:

15:30 GMT+3. USD - GDP q/q

17:00 GMT+3. USD - Pending Home Sales m/m

18:00 GMT+3. USD - EIA Crude Oil Stocks Change

USDJPY:

The Japanese yen eased on Thursday, boosted by comments from Bank of Japan (BoJ) board member Seiji Adachi on Wednesday. Adachi emphasised that bond purchases should be gradually reduced so that long-term yields accurately reflect market signals. He also suggested that raising interest rates may be appropriate if a weaker Japanese yen leads to higher inflation, as reported by Reuters.

Traders have increased their bets that the Bank of Japan (BoJ) will hold another interest rate hike. Investors are now turning their attention to Tokyo's inflation data, scheduled for release on Friday, which is considered a key gauge of price trends in the country.

Aggressive remarks from Minneapolis Fed President Neel Kashkari have further fuelled fears of a possible rate hike, supporting a significant yield gap between the US and Japan. This environment continues to facilitate ‘yen carry’ trades, where investors use the low-yielding Japanese yen to invest in higher-yielding USD assets.

The US dollar (USD) strengthened amid rising US Treasury yields, partly driven by increased risk aversion ahead of the release of US gross domestic product annualised (Q1) data on Thursday. In addition, market participants will be monitoring the core personal consumption expenditure (PCE) price index data scheduled for Friday, which is expected to provide insight into the Federal Reserve's potential stance on interest rate adjustments.

Trade recommendation: We follow the level of 157.20, if it bounces back, we take Sell positions. If we consolidate above it, we take Buy positions.

FreshForex offers a wonderful 300% bonus on every deposit of $100 or more, giving you the opportunity to increase your trading volumes!

David Johnson
Analyst of «FreshForex» company
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