Recently, the USD/JPY pair has touched both the extremes of its range of 105-112. The pair moved upward from below 106 to a high above 111 through May. But Japan PM Abe’s decision to postpone the hike in Japan’s consumption tax for the second time, along with the weak US payrolls report and Fed official’s dovish comments pushed it downwards to close near 105. The Japanese economic outlook still continues to be weak.
In spite of the first quarter growth being upwardly revised from 1.7 percent to 1.9 percent, inflation continues to be a vital worry. Core inflation, stripping energy prices and food, performed below market expectations. Moreover, machine orders also came in considerably below projections. There is an increasing possibility of the BoJ further easing the monetary policy, which it might announce in the weeks to come, given the medium-term inflation expectations, said Lloyds Bank in a research report.
“We anticipate USD/JPY rallying back above 110, and reaching 115 by year-end,” added Lloyds Bank.
