With tonight’s announcement from the U.S. Federal Open Market Committee (FOMC) approaching, USD/JPY is expected to lack a clear direction. The market is increasingly pricing in a 0.25% rate hike rather than a policy-rate hold.
The latest market outlook puts the expected USD/JPY range during European and U.S. trading hours at ¥153.000–¥156.500. Trading in Tokyo has centered on the lower half of the ¥155 range. Buying emerged temporarily amid factors including higher oil prices, but investors are now moving to unwind positions ahead of the FOMC.
The market views a 0.25-percentage-point rate hike at tonight’s FOMC meeting as almost certain, and is pricing in 2 additional rate hikes by year-end. The Fed’s dot plot and Chair Warsh’s press conference are expected to provide clues about the timing and pace of future rate hikes.
The event schedule calls for a series of U.S. economic releases from the evening of 16 September through the early hours of 17 September, including retail sales, the import price index, the NAHB housing market index and business inventories. FOMC-related developments are expected to be the main focus of the market.