The U.S. dollar is regaining strength, with the USD/JPY pair poised for a positive weekly close above 143.00, fueled by renewed optimism over global trade deals. The U.S. Dollar Index (DXY), which measures the greenback against six major currencies, recovered to near 99.75 after a modest pullback on Thursday.
President Donald Trump bolstered sentiment during North American trading hours by telling reporters that trade negotiations with several countries are progressing well. Notably, Trump highlighted that a deal with Japan is nearing completion, a development investors greeted as a sign of easing trade tensions.
However, contradictory signals from China injected caution. Trump claimed that Chinese President Xi Jinping reached out to him during an interview with Time Magazine, a statement Beijing officials promptly denied. According to a spokesperson from the Chinese embassy, “China and the US are not having any consultation or negotiation on tariffs,” Reuters reported.
Key drivers behind the USD rebound:
- Trump’s comments on nearing trade deals
- Positive market response to U.S.-Japan discussions
- Investor skepticism over U.S.-China trade prospects
Despite conflicting narratives, the dollar’s resilience hints at enduring investor confidence in the U.S. economy’s underlying strength.
Rising Tokyo Inflation Supports Yen
In Japan, inflation data added a new dimension to the USD/JPY outlook. The Tokyo Consumer Price Index (CPI) for April came in hotter than anticipated, suggesting persistent inflationary pressures that could influence Bank of Japan (BoJ) policy.
The Tokyo
fresh food rose 3.4% year-over-year, surpassing expectations of 3.2% and markedly higher than the previous month’s 2.4% reading. This robust figure keeps alive the possibility of further rate hikes from the BoJ, a shift from its traditionally ultra-loose monetary stance.
Highlights from Japan’s April CPI report:
- Tokyo CPI excluding fresh food: 3.4% (Actual) vs. 3.2% (Forecast)
- Previous reading: 2.4%
- BoJ’s policy outlook: Increasingly hawkish
As inflation persists, pressure mounts on BoJ policymakers to consider tightening measures, a development that could influence the yen’s near-term trajectory.
Market Outlook for USD/JPY
Heading into the weekend, USD/JPY remains well-supported above the critical 143.00 level. Analysts suggest that continued progress in U.S. trade negotiations, combined with mixed signals from global inflation data, could dictate the pair’s movement in the coming sessions.
Key factors to watch:
- Updates on U.S. trade deals, especially with Japan
- China’s stance on future economic talks
- BoJ’s next steps in response to rising inflation
Should optimism around trade deals persist, and if U.S. macro data remains firm, USD/JPY could maintain its upward bias, with technical resistance seen near 144.20 and 145.00. However, unexpected shifts in global trade relations could quickly reverse gains.
