The yen weakens further against the dollar as ECB officials defend rate hikes amid persistent inflation concerns and US markets close for Juneteenth.
The USD/JPY pair approached levels last seen in 1986, driven by widening monetary policy divergence between the US Federal Reserve and other central banks. The yen’s decline reflects expectations of prolonged Fed hawkishness amid a US holiday closure for Juneteenth, reducing liquidity in North American markets today.
ECB policymakers defended last week’s rate hike, with Chief Economist Philip Lane describing the inflation shock as “mid-sized.” Governing Council member Pierre Wunsch argued that upside inflation surprises could justify further tightening, though easing geopolitical tensions and wage growth may temper future moves. UK retail sales rose 1.2% in May, exceeding forecasts, but failed to shift Bank of England rate expectations.
Markets remained subdued ahead of the US holiday, with futures markets closing early at 12:00 p.m. ET. FX option expiries for June 19 were noted but had limited impact on trading activity.