USD/JPY tests 109 handle as Wall Street looks to close higher

• US stocks remain on track to end day modestly higher.
• US Dollar Index stays quiet above 96.
• Political developments in the UK help market sentiment improve.

The USD/JPY pair touched the 109 mark  in the last hour for the first time since January 6 supported by the positive market mood and a slightly stronger greenback. As of writing, the pair was up 0.24% on the day at 108.95.

With Goldman Sachs and Bank of America shares recording impressive gains on the back of upbeat earnings figures, the S&P 500 Financials Index added more than 2.5% to keep major equity indexes in the positive territory on Wednesday. As we approach the closing bell, the financial-heavy Dow Jones Industrial Average is up 0.83% on the day while the S&P 500 and the Nasdaq Composite are adding 0.5% and 0.25%, respectively. In addition to the stocks’ performance, the fact that British Prime Minister Theresa May has survived the no confidence challenge today allowed risk appetite to reman strong in the session.

Earlier in the day, the Fed in its Beige Book noted that the economic activity expanded in the U.S. with eight of 12 Fed districts reporting modest-to-moderate growth. Touching on the downside risks,  “Many districts reported contacts had become less optimistic due to increased financial market volatility, rising short-term interest rates, falling energy prices and elevated trade and political uncertainty,” the Fed added. The US Dollar Index didn’t show a meaningful reaction and stayed in its tight range above the 96 mark.

In the early trading hours of the Asian session, Japan’s Statistics Bureau will publish its inflation report. Markets expect the core-CPI to tick down to 0.8% on a yearly basis in December.  

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