Ahead of the FOMC and the Bank of Japan policy meeting, USD/JPY is expected either to rise toward ¥158 or to test below ¥150. The deciding factors will be US CPI and remarks by Governor Ueda (植田).
With the US Federal Open Market Committee (FOMC) and the Bank of Japan’s Monetary Policy Meeting scheduled for late September, the foreign exchange market continues to search for direction in USD/JPY. Depending on the outcome of the two meetings, the market is focused on a wide range, with USD/JPY potentially rising toward ¥158 or falling below the year-to-date low of ¥150.
The focus of the FOMC is expected to be its rate decision. August PPI showed growth, leaving the release of August CPI as the final input for the decision. Market forecasts call for headline CPI to rise 3.4% year on year and core CPI to rise 2.4%. Some observers believe that a substantial slowdown in headline CPI is not expected, but the results are nevertheless expected to trigger buying or selling of dollars.
A 0.25% rate hike at the Bank of Japan meeting is considered almost certain, shifting the focus to the pace of any further rate hikes. The market reaction is expected to vary depending on the impact of the composition of the committee and remarks in the statement, as well as Governor Ueda’s press conference. Market participants will focus on such issues as whether rate hikes will continue at the October meeting.
Key events next week are expected to center on the FOMC’s policy rate announcement and dot plot, as well as the Bank of Japan meeting and Governor Ueda’s press conference, while US economic indicators and Japan’s consumer price index are also expected to influence market trends. Market participants are alert to the possibility that USD/JPY could undergo a major trend shift following the CPI data and remarks from the Bank of Japan.