USD/JPY stays quiet near 161.50 ahead of US Inflation test

• USD/JPY hovers below 161.50 as the US Dollar declines ahead of US Inflation data.
• The US inflation will influence market speculation for Fed rate cuts.
• Fears of Japan’s intervention have intensified.

The USD/JPY pair consolidates in a tight range near 161.50 in Thursday’s European session. The asset trades back and forth as investors have shifted to sidelines ahead of the United States (US) Consumer Price Index (CPI) data for June, which will be published at 12:30 GMT.

Economists expect that annual headline inflation decelerated to 3.1% from May’s reading of 3.3%. In the same period, the core CPI, which strips off volatile food and energy prices, is estimated to have grown steadily by 3.4%. On the month, the headline inflation grew at a meager pace of 0.1% after remaining unchanged, with core CPI rising steadily by 0.2%.

The inflation data will significantly impact firm speculation for the Federal Reserve (Fed) to begin lowering interest rates in September. Ahead of the US Inflation data, the US Dollar (USD) faces severe selling pressure as comments from Fed Chair Jerome Powell in his testimony before Congress signaled that the US economic growth has lost momentum.

Fed Powell said "Labor market conditions have cooled considerably compared to where they were two years ago," and added that the US “is no longer an overheated economy.”

Market sentiment remains cautious amid uncertainty ahead of US inflation data. S&P 500 futures have posted some losses in European trading hours. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near a four-week low around 104.85.

Meanwhile, in Asia, the Japanese Yen remains weak despite growing speculation of Japan’s stealth intervention. The Japanese Yen is close to a multi-decade low near 162.00 against the US Dollar amid uncertainty over room for further policy tightening by the Bank of Japan (BoJ).