Yen edges higher on BoJ’s Ueda hawkish remarks

The Japanese yen is in positive territory on Friday. In the European session, USD/JPY is trading at 146.06, down 0.14% on the day. The yen has looked sharp this week, gaining 1% against the struggling US dollar.

Japan’s Core CPI rises to 2.7%

Japan’s core CPI rose 2.7% in July, up for 2.6% in June and in line with market expectations. The gain was largely driven by a rise in electricity prices after utility subsidies were removed. This marked a third straight acceleration and was the highest reading since February.

Japan finds itself as an outlier among the major economies as inflation is moving higher and the Bank of Japan is planning to hike interest rates. The BoJ raised rates into positive territory in Mach but rates are still close to zero. The BoJ has signaled that its plans to continue moving towards normalization and Governor Ueda reiterated that stance on Friday in a speech in parliament.

Ueda said that the BoJ would raise rates if the economy and prices stay in line with forecasts. Ueda added a note of caution, saying that the BoJ was carefully monitoring the impact of the turmoil in the financial markets on inflation. The BoJ is widely expected to maintain rates at the September meeting but we could see a hike in December.

All eyes on Mr. Powell

The annual Jackson Hole meeting is an opportunity for central bankers to discuss rate policy and provide some clues to the eager markets. There is little doubt that the Federal Reserve will cut rates next month, which means that Powell’s speech later today may not provide any dramatic insights. The markets will be closely monitoring Powell’s tone and any comments about inflation and employment. The Fed has largely won the battle with inflation but there are fresh concerns that the employment picture is darkening, which could push the Fed to keep cutting before the end of the year.
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USD/JPY Technical

• There is resistance at 146.94 and 147.58
• USD/JY is testing support at 145.90. Below, there is support at 145.26

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