USD/JPY climbs above 151.00 as US Dollar recovers ahead of Fed Powell’s speech

• USD/JPY extends its winning spell above 151.00 amid a recovery in the US Dollar.
• Jerome Powell may highlight the need for ‘higher for longer’ interest rates.
• BoJ Ueda warned about the consequences of exiting from an easy policy stance on financial institutions.

The USD/JPY pair continues its winning streak for the fourth trading session on Thursday. The asset extends upside above 151.00 as investors remain cautious ahead of the speech from Federal Reserve (Fed) Chair Jerome Powell.

S&P500 futures trade directionless in the European session amid caution ahead of Fed Powell’s speech. The US Dollar Index (DXY) rebounds after consolidating near 105.50 amid expectations that Fed Powell could keep doors open for further policy tightening.

Jerome Powell may highlight the need for ‘higher for longer’ interest rates as consumer inflation expectations are stubborn due to a stable job market and robust consumer spending. Apart from the guidance on interest rates, the outlook on economic performance will be in focus. Powell may quote the ‘rate cuts’ narrative as ‘unreasonable’ due to persistent inflationary pressures.

Meanwhile, Philadelphia Fed President Patrick Harker, in a statement, said that the next decision from the central bank would be highly dependent on economic data. Fed Harker sees the Unemployment Rate rising to 4.5% before falling in 2024 and inflation falling to 3% in 2024.

The Japanese Yen weakened against the US Dollar as wage growth in Japan slumped, which has resulted in a slowdown in consumer spending. A steady wage growth is the foremost requirement of the Bank of Japan (BoJ) for exiting from ultra-loose monetary policy.

BoJ Ueda warned that the central bank would need to be very careful while exiting from an easy policy stance as it would impact financial institutions, borrowers, and the overall demand significantly.