Japanese Yen hangs near weekly low after weak spending data as USD bulls await US NFP
The USD/JPY pair is seen consolidating this week's solid recovery gains from the 155.25-155.20 region, the lowest since May, touched in the aftermath of a joint US-Japan intervention, and holds steady near the weekly top.
The USD/JPY exchange rate has been hovering near its weekly low, trading in the mid-158.00s range, as the pair consolidates post-its recent recovery gains. Market participants are awaiting the influential US Nonfarm Payrolls (NFP) report to determine the US Federal Reserve's future policy trajectory, which will impact the demand for the US Dollar and subsequently, the USD/JPY pair.
Meanwhile, geopolitical tensions and inflationary risks stemming from rising oil prices continue to bolster the safe-haven USD. The recent escalation in the Middle East crisis, with Saudi Arabia reporting that Iraqi militias, allied with Yemeni Houthis, are planning a strike on the kingdom, and Iran's announcement of a framework agreement restricting passage through the Strait of Hormuz, has added to the geopolitical risk premium, prompting traders to price in potential consequences.
This, in turn, has led to a surge in crude oil prices. Concerns about Japan's deteriorating fiscal situation and the impact of rising energy costs on inflation have weighed on the Japanese Yen (JPY). In June, Japanese Household Spending unexpectedly declined by 3.3% year-on-year, marking the seventh consecutive month of contraction, which further undermines the Bank of Japan's (BoJ) prospects for a September rate hike.
As a result, the JPY is facing headwinds from fears of a subdued economy and elevated energy prices, which could prompt central banks to adopt a more hawkish stance and lift borrowing costs.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written; read the original for the full account.
