Markets increasingly price out a June Federal Reserve rate cut, lifting USD and pressuring JPY amid persistent geopolitical tensions and strong US data.
The Japanese yen extended losses against the US dollar as traders scaled back bets on a June Federal Reserve rate cut. The shift follows persistent geopolitical risks in the Middle East and resilient US economic data, reducing expectations for imminent monetary easing.
Recent US-Iran developments, including a reported 60-day memorandum of understanding, initially weighed on the dollar before tensions flared again over Israeli strikes in Lebanon. Despite mixed signals, oil prices remain elevated due to ongoing disruptions in the Strait of Hormuz, supporting inflation concerns.
With the Fed’s June FOMC meeting approaching, markets now anticipate a more hawkish stance, potentially reinforcing USD strength. The yen’s decline reflects broader risk sentiment and diverging monetary policy outlooks between the US and Japan.