USD/JPY Retreats as US-Iran Peace Deal Sentiment Weighs on Dollar
The USD/JPY pair retreated in Thursday's Asian session, halting its three-day winning streak but still trading above 159.00. The pullback was modest, with prices remaining near their highs.
Improved sentiment around a potential US-Iran peace agreement and progress on reopening the Strait of Hormuz are limiting the upside in the US Dollar and weighing on USD/JPY. Russian state media reported that the US and Iran have reached a new ceasefire deal that would be announced in the coming days, while another report said that Iran and Oman have agreed on commercial shipping routes through the Strait.
The impact of hotter US PCE inflation data was tempered by these developments, which offset expectations for at least one US Federal Reserve interest rate increase in 2026. Data from the US Commerce Department showed the Personal Consumption Expenditures (PCE) Price Index rose 3.7% over the 12 months in July, unchanged from the prior month and slightly above consensus forecasts.
Market participants are now focused on Fed Chair Kevin Warsh's remarks scheduled for Friday, which could be pivotal for near-term US Dollar performance. The guidance may offer indications on the central bank's future policy path, influencing USD/JPY prices in the coming days.