USD/JPY Fundamental Analysis: February 22, 2017
There is a high demand for riskier assets that pushed the USD/JPY pair to climb on Tuesday session. Also, the appreciation of dollar was influenced by a stiff sell-off in Euro because of increase in political worries.
Moreover, the stock market surged that influenced the Japanese yen higher because of the carry trade while the recent remarks of Fed officials drove the appreciation of the U.S. dollar. The pair closed at 113.673, increased by 0.582 or +0.51%.
Cleveland Fed President Loretta Mester remarks on Monday also significantly affected the next day trading. This was pushed further by the announcement of Philadelphia Fed President Patrick Harker saying the pending next rate hike on March.
U.S. economic data results for the U.S. Purchasing Managers Index (PMI) was at 53.9 in February, lower from the reported 55.6 in January and the expected result to be at 55.8.
The continued low borrowing rates made the San Francisco Fed President John Williams to have a dovish sentiment. Similar with Minneapolis Fed President Neel Kashkari comments saying the there is no need to rush and go for inflation right away.
The Japanese yen was also influenced by rise in political risk in Europe and excessive sell-off by Euro. The rhetorics of French candidates Marine Le Pen and Dutch candidate Geert Wilders prior to elections has influenced the market sentiment.
Gold investors also reacted to the latest Existing Home Sales data in U.S. trading. The data is predicted to give e a 5.55 million unit gain. On the other hand, the FOMC Member Powell is scheduled to give a speech today. The Fed minutes for February Monetary Policy meeting will also be released which is highly anticipated.
It is anticipated for the market to have high volatility with the release of major economic data and the decision from the monetary policy meeting and connect it with the remarks before the Congress of Fed Chair Janet Yellen last week. Investors will try to get hints on chances for the Fed rate hike on March. As of now, there is 17% chances for a rate hike in March while 47% in June regarding the Fed fund futures.