USD/JPY consolidates its gains around 146.50 on the Fed’s Powell hawkish stance

• USD/JPY takes a breather around 146.47 after reaching the highest level since November 2022.
• Japanese policymakers said that underlying inflation remains below its target, will maintain the current policy framework.
• Federal Reserve (Fed) Chairman Jerome Powell stated that they are prepared to hike interest rates further if required.
• Investors will closely watch the Nonfarm Payrolls (NFP) data on Friday.

The USD/JPY pair consolidates its recent gains below the mid-146.00s during the early Asian session on Monday. The pair trades close to the highest level since November 2022 of 146.62, which was reached on Friday. The divergence in monetary between the Federal Reserve (Fed) and the Bank of Japan (BoJ) boosts the Greenback, but the possibility of BoJ intervention could limit further appreciation.

BoJ Governor Kazuo Ueda said at a Federal Reserve research symposium on Saturday that the central bank believes underlying inflation remains below its target, which is why they will maintain the current ultra-easy monetary policy framework. Policymakers said that domestic demand was still healthy and company fixed-investment were supported by record high profits, said Reuters.

On the US Dollar front, hawkish comments from the central banks' policymakers limit the upside of the Japanese Yen and support the USD/JPY pair. At the Jackson Hole, the Federal Reserve (Fed) Chairman Jerome Powell stated that the central bank is prepared to hike interest rates further if required and the next rate hike would be determined by data.

Apart from Powell’s speech, Philadelphia Fed President Patrick Harker said that he does not see the need for additional rate hikes at this time and the Fed should hold rates steady and observe the impact of policy on the economy. Meanwhile, Cleveland Fed President Loretta Mester said that GDP and labor market data show that the economy is gaining momentum. She emphasized that the current rates are not restrictive enough to reach the inflation target and a lower growth rate would be essential to moderate inflation. That said, the monetary policy differential between the US and Japan is the main driver of the Yen's weakening.

Moving on, market players will keep an eye on the Japanese Unemployment Rate and Retail Sales on Tuesday and Thursday, respectively. Also, the US preliminary Gross Domestic Product Annualized (GDP), Core Personal Consumption Expenditures (PCE) Index, and the weekly Jobless Claims will be due later this week. The attention will shift to the Nonfarm Payrolls (NFP) data on Friday. The events will be critical for determining a clear movement for the USD/JPY pair.