Daily Digest Market Movers: Japanese Yen bulls seem non-committed amid BoJ policy uncertainty
- Israel expressed its intentions to expand its operations to destroy Hamas amid the uncertainty over a ceasefire, while Russia is preparing a new offensive against Ukraine starting in late May or summer.
- This, along with the recent warnings from Japanese authorities that the government will intervene in the markets to stem further weakness in the domestic currency, offers support to the Japanese Yen.
- Data released earlier this month showed that Japan's economy entered a technical recession, and smashes hopes that the Bank of Japan will exit the ultra-easy policy regime, capping the JPY.
- The FOMC meeting minutes released last week, along with comments by Fed officials, indicated that the central bank is in no rush to cut interest rates as it aims to bring inflation to the 2% target.
- Expectations that the Fed will keep rates higher for longer remain supportive of elevated US Treasury bond yields and assist the US Dollar to hold steady above a three-week low touched last Thursday.
- This, along with the underlying bullish sentiment surrounding the global equity markets, undermines the safe-haven JPY and turns out to be a key factor acting as a tailwind for the USD/JPY pair.
- Investors now await this week's key US macro data, including the Core PCE Price Index, for fresh clues about the Fed's future policy decision before positioning for a firm near-term direction.
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