The release of the U.S. September CPI and September PPI will be the focus next week, while expectations for an October FOMC rate hike, following remarks by Fed Chair Warsh, are expected to determine market momentum. The dollar-yen pair is likely to remain in wait-and-see mode, centered on a range of ¥157.50-¥158.50.
Next week's focus will be the release of the U.S. September consumer price index (CPI) and U.S. September producer price index (PPI), with Fed Chair Warsh's remarks on the 16th in response to the data also important. The market is seeking to determine whether the Federal Reserve will raise rates at the October FOMC, with current pricing implying a probability of around 20%.
The dollar-yen pair has traded within a narrow range from around ¥157.50 to around ¥158.50 this week, and is expected to remain within this range before the U.S. CPI release. However, with crude oil prices remaining elevated amid heightened tensions in the Middle East, a break in either direction could lead to a significant move.
Depending on the CPI results, a figure above expectations could strengthen dollar buying, while a figure below expectations could reinforce expectations that the October rate hike will be deferred. The market's focus is expected to be on the reaction after a break below ¥157.50. Additional remarks by the Fed chair on the 16th could also be decisive.
Next week's events include a speech by the president of the Federal Reserve Bank of Cleveland on 10/12, earnings announcements and economic indicators from major companies on 10/13, and the CPI/PPI releases and remarks by Fed officials on 10/14-10/15. The direction and momentum of any break in the dollar-yen pair are likely to be particularly sensitive to these factors.