The relative stability of the USD/JPY pair following Japan's recent elections indicates that markets can swiftly react to political changes, impacting economic expectations.
After the Liberal Democratic Party lost its majority, the yen retreated to around 152.95, reflecting immediate market reactions to political uncertainty and future economic policies.
Political uncertainty may hinder the Bank of Japan's ability to enact bold monetary policies, impacting expectations for interest rate changes amidst a divided government.
With U.S. Treasury yields influencing USD/JPY, the outlook of less aggressive U.S. monetary policy supports the dollar, particularly if upcoming economic data underperforms.
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