USD/JPY struggles to extend upside above 149.00, US PPI awaited

• USD/JPY aims to extend its upside above 149.00 as traders pare Fed dovish bets.
• The US CPI report showed that the impact of Trump's tariffs has started feeding into inflation.
• US-Japan trade tensions keep the Japanese Yen on the backfoot.

The USD/JPY pair faces selling pressure while extending its upside above 149.00 during the European trading session on Wednesday. The pair struggles as the US Dollar (USD) takes a breather after refreshing the three-week high, following signs from the United States (US) Consumer Price Index (CPI) report of June that prices of imported goods have increased.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, clings to gains near the three-week high around 98.60.

Sign of a resumption trend in inflationary pressures on the upside has forced traders to pare bets supporting interest rate cuts by the Federal Reserve (Fed) in the September monetary policy meeting. Meanwhile, the Fed is widely anticipated to leave interest rates steady in the range of 4.25%-4.50% in the policy meeting later this month.

Going forward, investors will focus on the US Producer Price Index (PPI) report for June, which will be published at 12:30 GMT. Investors will pay close attention to the data as it will indicate how much producers raised prices of goods and services at factory gates to offset the impact of tariffs imposed by President Donald Trump since his return to the White House.

Meanwhile, the Japanese Yen (JPY) continues to remain on the backfoot amid trade tensions between the US and Japan as Washington has imposed 25% tariffs on imports from Tokyo, which are separate from sectoral levies, after failing to close a trade deal during the 90-day tariff pause period. However, Tokyo continues to negotiate on trade with Washington to close a trade deal before the new deadline of August 1.