Anna 
In Wednesday’s London session, the USD/JPY pair experiences a sharp decline, reaching 149.50, as the Japanese Yen gains strength. The catalyst for this pressure comes from reports by the Jiji News Agency, stating that certain members of the Bank of Japan’s (BoJ) Monetary Policy Committee (MPC) are inclined towards an exit from the ultra-loose monetary policy stance at the upcoming March policy meeting.
Last week, BoJ board member Hajime Takata expressed optimism, noting that the central bank’s goal of maintaining sustainable inflation above 2% is “finally in sight.”
Anticipation of a potential lift in negative interest rates by the BoJ, maintained for over a decade, has led to expectations of the Japanese Yen’s broader outperformance. This move is prompted by discussions of abandoning the expansionary policy stance due to improving wage growth outlook, a crucial factor in the persistent below-2% inflation.
Simultaneously, the US Dollar weakens as market expectations for Federal Reserve (Fed) rate cuts in the June policy meeting rise. The CME FedWatch tool indicates a slightly over 57% chance of a 25 basis points rate cut in June, up from approximately 52% on Tuesday.
Looking ahead, the trajectory of the US Dollar will be influenced by Fed Chair Jerome Powell’s testimony before Congress at 15:00 GMT, providing updated guidance on the central bank’s timeline for initiating interest rate reductions.
