Focus on the Middle East and US Retail Sales in the USD/JPY Forecast

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As investors, it’s not just about the numbers – we need to keep a close eye on global events and central bank responses. With the rising threat of a prolonged conflict in the Middle East, the Bank of Japan’s commentary could play a crucial role in moving the dial for the markets.

In the US, the economic calendar for the week ahead is packed with key events. Retail sales figures will be in focus, alongside the NY Empire State Manufacturing Index. The USD/JPY pair could see significant movement based on the outcome of these reports, especially as expectations for a June Fed rate cut are on the decline.

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Economists are forecasting a 0.3% increase in retail sales for March, following a 0.6% rise in February. If the numbers come in better than expected, it could further dampen hopes for a June Fed rate cut. This, in turn, could impact borrowing costs and disposable income, shaping the trajectory of demand-driven inflation.

But it’s not just about the economic data – investors should also pay attention to FOMC member chatter. Keep an eye on scheduled speeches, like the one from Mary Daly, as discussions around the Iran conflict and its implications for monetary policy could shake up the markets.

Recent movements in investor bets on a June Fed rate cut reflect the changing landscape. According to the CME FedWatch Tool, the probability of a rate cut has fallen significantly in the past week. Factors like Fed speeches and US inflation numbers have been influencing these bets, pointing to a potential shift in the monetary policy outlook.

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