USD/JPY exhibits volatility contraction near 155.60 due to sidelined US Dollar
|- USD/JPY is stuck in a tight range as the US Dollar consolidates.
- The US Dollar stays on the sidelines despite Fed officials maintaining hawkish guidance on interest rates.
- Investors await the US S&P Global PMI and Japan’s National CPI data.
The USD/JPY pair displays a sharp volatility contraction near 155.60 in Monday’s European session. The asset struggles for direction as investors shift focus to the Federal Open Market Committee (FOMC) minutes for the May meeting and commentaries from Federal Reserve (Fed) policymakers that will provide fresh guidance of the interest rate outlook.
S&P 500 futures have posted decent gains in the European session, exhibiting an increase in investors’ risk-appetite. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, consolidates in a tight range around 104.50.
Fed policymakers are expected to have used a hawkish tone on interest rates in the May’s policy meeting. The United States (US) Consumer Price Index (CPI) data disappointed Fed policymakers in the first three months, forced them to emphasize keeping interest rates at their current levels.
For the April month, US inflation has declined as expected and the labor demand remained soft, suggesting that the progress in inflation declining to the 2% target is on track. This has strengthened expectations for the Fed to begin reducing interest rates from the September meeting.
On the economic data front, investors will look to US S&P Global PMI data for May, which will be published on Thursday. The economic data will indicate whether the economy is effectively coping with the consequences of the Fed's higher interest rates.
Meanwhile, the Japanese Yen is under pressure as investors worry about the limited scope of policy tightening by the Bank of Japan (BoJ). Th Japanese economy was contracted at a faster pace in the first quarter of this year. Going forward, the National CPI data will provide fresh guidance on interest rates, which will be published on Friday. The National CPI excluding fresh goods is estimated to have declined to 2.2% from the prior reading of 2.6%.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.