Weekly forex outlook: Markets weigh monetary policy stances of U.S. and Japan

The dollar-yen exchange rate is expected to trade sideways next week as market participants digest the monetary policy trajectories of the central banks of Japan and the United States. The currency pair is projected to move within a range of 159.00 to 161.50 yen.

The Bank of Japan is widely expected to raise interest rates at its policy meeting on June 15?16. Market focus centers on any forward guidance regarding post-hike moves; a lack of hawkish signals could spark further yen depreciation. With Governor Kazuo Ueda sidelined due to hospitalization, Deputy Governor Shinichi Uchida will step in to chair the press conference. His remarks will be closely scrutinized and could trigger significant market volatility.

Across the Pacific, the Federal Reserve will convene its Federal Open Market Committee (FOMC) meeting on June 16?17. Interest rates are anticipated to hold steady, marking the debut of newly appointed Chair Kevin Warsh. Amid lingering inflationary pressures driven by elevated crude prices, expectations are mounting for a rate hike later this year, making Warsh’s policy stance the main event for investors.

Geopolitical headlines will also drive sentiment as investors monitor U.S.-Iran ceasefire talks. While U.S. President Trump has signaled a final agreement is near, Iran's Foreign Ministry stressed that Tehran will not cross its "red lines," keeping the outcome highly uncertain. A collapse in talks and any resurgence of full-scale conflict would likely trigger intense safe-haven flows into the dollar.

The upcoming economic calendar features several high-impact releases. For the U.S., the June New York Fed Manufacturing Index and May industrial production drop on June 15, followed by May housing starts on June 16, and May retail sales on June 17. The June Philadelphia Fed Manufacturing Index and May Leading Economic Index arrive on June 18. On the domestic front, Japan's May trade data and April machinery orders are slated for June 17, capped by the critical May nationwide Consumer Price Index (CPI) on June 19.

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.