The USD/JPY pair rebounds to historic highs of 152.00 in Wednesday’s early American session. The asset is expected to extend its upside by easing expectations that the Federal Reserve (Fed) will begin reducing interest rates from the June meeting.
Fed policymakers don’t see any urgency for rate cuts as labor market conditions are tight and the economic outlook is strong. On Tuesday, Cleveland Fed Bank President Loretta Mester said that the central bank sees more risk in cutting interest rates too early. Fed Mester added: “With labor markets and economic growth both being very solid, we do not need to take that risk”. At the same time, she sees three rate cuts as “reasonable” this year.
Meanwhile, the United States ADP reported upbeat employment data for March. The agency reported that private employers hired 184K new workers against expectations of 148K and the prior reading of 155K (revised up from 140K).
Going forward, investors will focus on Fed Chairman Jerome Powell's speech, which is expected at 16:10 GMT. Powell is expected to provide cues about when the central bank will pivot to rate cuts.
Meanwhile, the Japanese Yen is broadly weak as investors lack confidence that the Bank of Japan (BoJ) will tighten its policy sooner due to uncertainty over the wage growth spiral. Investors seem to have digested fears of Japan’s intervention in the FX domain to support the Japanese Yen.
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