The movement of the New York currency market is expected to be heavily influenced by the September US CPI results. Based on the outlook for headline and core CPI, the article lays out 3 scenarios and the expected range for dollar-yen.
Today's New York currency market is expected to be heavily influenced by the September US CPI results and movements in US long-term interest rates in response. Market expectations call for headline CPI to accelerate to 3.6% year on year and increase to 0.6% month on month, while core CPI is expected at around 2.5% year on year and 0.2% month on month.
The article then presents 3 scenarios. Scenario 1 is a significantly stronger-than-expected upside surprise, which could undermine expectations of a hold in October and increase expectations of a rate hike at the December FOMC meeting. It also suggests that continued energy price increases could strengthen dollar buying.
Scenario 2 is a significantly weaker-than-expected downside surprise, which could make an October hold virtually certain and reduce expectations of an additional rate hike in December. However, the impact of higher crude oil prices would remain, so dollar selling would not spread across the market.
Scenario 3 is an in-line result, in which heightened market caution, depending on the size of the move in core CPI, could lead to a continued dollar-buying response.
As for the expected range, ¥159.04 is the upper limit for dollar-yen, with the higher moving average at ¥159.44 as a reference level. The downside is expected to be limited at ¥157.52, with the lower boundary of the daily Ichimoku cloud at ¥156.64 cited as a further reference level.