USD/JPY Edges Higher Amid US-Iran Tensions
The US dollar has been experiencing an upward trend as tensions between the US and Iran escalate. The recent exchange of attacks between both countries, including Iranian strikes on three vessels in the Strait of Hormuz and US-launched strikes on Iran, have led to increased oil prices and a hawkish repricing in interest rate expectations.
The chances for a July hike jumped to 34% and the total tightening by year-end increased to 38 bps. However, after Trump said he doesn't think the war is going to restart and claimed that the Iranians called him because they want to make a deal, there was some minor dovish repricing and triggered pullbacks across the board.
The Japanese yen has also been affected by these developments, with its currency erasing all gains from last Thursday's suspected stealth intervention. The focus remains on the US CPI report, which could give the USD/JPY pair a boost in case the data surprises to the upside or trigger a bigger pullback if the data comes out lower than expected.