USD/JPY continues its upward move this week, as the pair has posted gains in the Wednesday session. Currently, USD/JPY is trading at 113.70. Earlier in the session, the pair hit its highest level since February 16. In Japan, Capital Spending posted a 3-month gain, at 3.8%. Final Manufacturing PMI improved to 53.3, shy of the forecast of 53.6 points. In the US, today’s highlight is the ISM Manufacturing PMI. On Thursday, Japan releases Household Spending and inflation indicators, led by Tokyo Core CPI. The US will publish the weekly unemployment claims report.
There was plenty of anticipation in the air ahead of President Trump’s speech to Congress. In the end, however, the speech was short on specifics and the markets haven’t shown much reaction in the Wednesday session. Trump promised "massive" tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, "financed through both public and private capital". Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past.
With Federal Reserve policymakers continuing to sound hawkish about a rate move, the US dollar could continue to rally against the yen. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.