USD/JPY rises above 151.00 as USD recovers ahead of Fed Powell speech

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

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

S&P 500 futures trade directionless in European session amid caution ahead of Fed’s Powell speech. US Dollar Index (DXY) bounces after consolidating near 105.50 amid expectations Powell’s Fed could keep the door 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 labor market and solid consumer spending. Aside from interest rate guidance, the focus will be on economic performance prospects. Powell may cite the “rate cuts” narrative as “unreasonable” due to persistent inflationary pressures.

Meanwhile, Philadelphia Fed President Patrick Harker said in a statement that the central bank’s next decision will depend largely on economic data. 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 plummeted, which has led to a slowdown in consumer spending. Stable wage growth is the Bank of Japan’s (BoJ) main requirement to exit ultra-loose monetary policy.

The BoJ’s Ueda warned that the central bank would have to be very cautious in exiting from an easy policy stance as it would significantly affect financial institutions, borrowers and overall demand.