USD/JPY aims to capture 152.00 on Powell’s hawkish remarks

• `USD/JPY approaches 152.00 after hawkish remarks from Fed Powell.
• Fed Powell expects that current interest rates are not sufficiently restrictive.
• The likelihood of Japan’s intervention has escalated after Powell’s hawkish remarks.

The USD/JPY pair has closed positive for straight four sessions in a row and is expected to continue its upbeat performance further, prompted by hawkish remarks from Federal Reserve (Fed) Chair Jerome Powell in his commentary on Thursday.

S&P500 futures added nominal gains in the Asian session, portraying a marginal improvement in the risk appetite of the market participants. The near-term market mood is still risk-averse as Fed Powell sees that current interest rates are not sufficiently restrictive to ensure the return of consumer inflation to 2%.

Jerome Powell commented that the Fed would not hesitate to raise rates further if it turned out appropriate to achieve price stability. The comments from Powell were surprising for markets as last week the Fed kept interest rates unchanged in the range of 5.25-5.50% and emphasized the narrative of keeping interest rates ‘higher for longer’.

The expectations for one more interest rate increase rose nominally after Powell's commentary. As per the CME Fedwatch tool, traders see a 15% chance for the Fed raising interest rates by 25 basis points (bps) in the December monetary policy meeting.

This week, a light economic calendar kept the spotlight on commentaries from Fed policymakers. Next week, investors will focus on the inflation data for October, which will guide further action in the US Dollar and bond markets.

Meanwhile, the Japanese Yen remains on the back foot against the US Dollar as plans of an exit from the ultra-loose policy stance by the Bank of Japan (BoJ) could be delayed due to lower wage growth. Higher price pressures due to external forces have dampened the real income of households and consumer spending.

Decent wage growth is a prerequisite for the BoJ to exit from the decade-long easy policy. The likelihood of a stealth intervention by Japan’s authority is high as Powell’s hawkish commentary on interest rates has worsened the appeal for the Japanese Yen.