"In relatively calm Asian trading, the USD/JPY pair is hovering around 147.95 after retreating to 147.60- a decline that was less surprising than it was a reflection of the intersection between two opposing monetary policy paths in the United States and Japan. On the one hand, the U.S. Federal Reserve, led by Jerome Powell, sent clear signals that the slowdown in the labour market has become a higher priority than persistent inflation, which was reflected in a rate cut last week."
"However, Powell stated yesterday that there might not be further cuts in 2025, stressing that the Fed will rely on data to determine the course of monetary policy on a meeting-by-meeting basis. On the other hand, the Bank of Japan stands on the brink of decisions that could mark a shift away from its ultra-loose stance, but the political uncertainty in Tokyo is limiting the yen's ability to capitalize on such expectations."
"In my view, what we are witnessing today is not merely a short-term move within a narrow range, but rather the start of a new balance in the FX market that could last for weeks. The dollar's trajectory is driven not only by the Fed's rate cut but also by simultaneous declines in U.S. business activity indicators. The latest PMI data point to slowing momentum across both manufacturing and services, reducing the dollar's attractiveness as a short-term haven."
USD/JPY trades near 147.95 after retreating to 147.60 due to diverging U.S. and Japanese monetary policy directions. The U.S. Federal Reserve cut rates last week and prioritized a slowing labour market while cautioning that further 2025 cuts are not guaranteed and will be data-dependent. The Bank of Japan may shift away from ultra-loose policy, but political uncertainty in Tokyo constrains yen gains. Slowing U.S. business activity and PMI readings reduce the dollar's short-term haven appeal, heighten volatility, and complicate market expectations for future monetary easing.
Read at London Business News | Londonlovesbusiness.com
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