The Japanese yen is almost unchanged in the Monday session. Currently, USD/JPY is trading at 113.40. On the release front, Japanese Revised Industrial Production dropped to 0.7%, but still beat the forecast of 0.5%. In the US, we’ll get a look at PPI and Janet Yellen testifies before Congress on the semi-annual Monetary Policy Report. If Yellen reiterates that the Fed plans several rate hikes this year, the US dollar could make gains. On Wednesday, the US releases retail sales and CPI reports, and Yellen will continue her testimony before the US Senate.
President Shinzo Abe met with President Trump last week, and Abe waxed positive about his summit with Trump. Abe said the two leaders had agreed to have their finance leaders discuss currency issues that have caused tensions between the US and Japan. Trump recently charged that Japan was manipulating its currency to gain a trade advantage. The Japanese government has countered that its ultra-accommodative monetary policy was aimed at curbing deflation. Still, Abe and BoJ Governor Haruhiko Kuroda will have to keep a close eye on the yen – if the dollar pushes past 120 yen, Trump could express his displeasure with the exchange rate in order to protect US exporters.
President Donald Trump has promised to cut taxes and spend big on infrastructure structures, but he has not released any details in this regard, much to the consternation of the markets. Last week, Trump said that the administration was working on a "phenomenal" tax plan, which would be released in a few weeks, although he gave no details. Trump’s plan is expected to lower taxes for both corporations and individuals, although tax reform promises to be a slow and daunting task. The markets are looking for some details regarding Trump’s plans for the US economy, and if Trump’s plan to reform the US tax code seems feasible, the markets could rally and push the US dollar to higher levels.