The Bank of Japan is highly likely to leave rates unchanged, with the focus on whether it signals a December rate hike. The article focuses on the outlook for USD/JPY and the market’s reaction.
As of the daytime market on the 29th, it was considered almost certain that the Bank of Japan would leave its policy rate at 1.25% at its Monetary Policy Meeting, while the market awaited clues about a December rate hike. USD/JPY traded in the low ¥158 range, and the Bank’s stance could determine whether the market enters a weaker- or stronger-yen phase. Market attention will focus on whether a December rate hike is signalled in the forthcoming statement or Governor Ueda’s press conference.
External factors included reports of robust US PCE deflator and GDP data and the ECB’s decision to leave rates unchanged. These figures point to trends in US inflation and growth and could also affect the dollar. Meanwhile, concerns about the impact of earnings from AI-related companies resurfaced, and movements in long-term yields affected the dollar’s momentum.
The outlook for USD/JPY is for limited upward pressure on the yen, with the market response expected to depend on the outcome of the Bank of Japan’s Monetary Policy Meeting. USD/JPY may test the 200-day moving average near ¥158.56, but as the market has already priced in a December rate hike, the move will probably remain within expectations depending on the statement’s content.
The points to watch going forward are the Bank of Japan’s statement, the content of Governor Ueda’s speech, and whether a December rate hike is signalled. Upcoming economic data include US employment indicators and German and euro-area GDP and inflation figures, and the foreign-exchange market may move depending on these results.