Where Is USD/JPY Headed After BOJ Ueda and Before Powell?
The USDJPY trend has changed since July, but yesterday’s 1.5 cent increase indicated traders’ trepidation ahead of Powell’s speech at the Jackson Hole Symposium as well as because of the BOJ Governor Ueda Speech in front of the National Diet’s upper house in Tokyo. The lower return this week following previous week’s higher retrace reaffirmed the FX pair’s bearish bias.
The USD/JPY exchange rate has been highly volatile due to the contrasting monetary policies of the Federal Reserve (Fed) and the Bank of Japan (BOJ). The Fed is widely anticipated to lower rates in September, with markets leaning toward a 25 basis point decrease, which Fed Chair Jerome Powell is expected to signal today. We also had the Japanese inflation this morning.
Japanese CPI Data Overview
- Overall CPI: 2.8% y/y, slightly above the expected 2.7%; prior CPI was 2.8%.
- Core CPI (excluding fresh food): 2.7% y/y, in line with expectations; prior Core CPI was 2.6%.
- Core-core CPI (excluding fresh food and energy): 1.9% y/y, matching expectations and marking the first time under 2% since September 2022; prior Core-core CPI was 2.2%.
USD/JPY Chart Daily – Buyers Will Face the 200 SMA
In stark contrast, the BOJ recently raised rates by 15 basis points in their latest meeting, fueling speculation of further tightening in Japan. This divergence has intensified market movements, making the USD/JPY pair particularly sensitive to policy announcements. Earlier this morning, the BOJ governor delivered a speech that could further influence expectations regarding Japan’s monetary policy.
Bank of Japan Governor Ueda Comments:
- Closely watch how market move affect price, economy outlook
- No change to our stance that we would adjust degree of monetary easing if our economy price outlook is likely to be achieved
- Will continue to work coordinate with govt
- BOJ ready to scrutinise how market moves affect our economic, price outlook and our view on risks, likelihood of developments moving in line with our forecasts
When was asked whether normalisation of monetary policy was too slow, replied that the BOJ’s policy steps were appropriate.
- concerns about slowing US economy caused recent market rout
- closely watching market moves with a sense of urgency as uncertainties remain
- domestic and overseas markets remain unstable
- decided to raise rates in July due to risk of price overshoot driven by import costs
- economy is moving in line with price target protections
- important to communicate with the public on BOJ’s thinking
- The Bank of Japan July rate hike decision was based on our inflation forecast and the risk of an inflation overshoot
- Japan’s real interest rate remain deeply in negative territory, so accommodative monetary condition is maintained
- Need to take time to decide with what to do with ETF held by BOJ
- Not thinking about getting rid of ETF immediately
USD/JPY Live Chart
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