Ella 
USD/JPY quickly jumped above 142.00 as the greenback held firm during the European session. The dollar’s strength comes from caution among market participants ahead of testimony from Federal Reserve Chairman Jerome Powell.
S&P 500 futures have recouped all of their losses during the Asian session and turned positive, showing a clear recovery in risk appetite among market participants. Economists at HSBC believe investors should brace for some consolidation as valuations have risen and the possibility of further Fed tightening could cut future earnings estimates and valuations in the short term. However, we feel the Fed is closer to the end of its monetary policy tightening cycle, which should bode well for US equities.
The U.S. dollar index (DXY) struggled in its recovery above 102.60 as the market was confused by Powell’s guidance. Investors are eagerly watching whether Powell will stick to his previous guidance of raising rates by a further 50 basis points (bps) this year or continue to rely on data.
Meanwhile, the yen will dance to the tune of Friday’s Consumer Price Index (CPI) data (May). Annualized headline CPI is seen accelerating to 0.1% from a previously reported 3.5%, according to the preliminary report. Core inflation, which excludes the impact of oil and food prices, is seen climbing to 4.4% from the previously reported 4.1%.
It appears the Bank of Japan’s (BoJ) consistently ultra-dovish interest rate policy is doing its job fairly. Bank of Japan Governor Kazuo Ueda has made it clear that wages and domestic demand need to rise further to boost domestic inflation.
