The yen remains calm and is lower on Tuesday. In the North American session, USD/JPY is trading at 157.98, up 0.34% on the day.
US inflation expected to rise
There are no tier-1 events out of Japan this week and the yen is having a relatively quiet week. That could change with the release of US inflation on Wednesday. Headline CPI is expected to rise to 2.9% y/y in December from 2.7% in November, while core CPI is expected to remain at 3.3% y/y for a third straight month. Inflation reports have had significant impact on rate expectations but the December inflation rate might not be all that significant, as expectations of a rate cut have fallen in recent weeks.
Since the December meeting, the Fed has tried to dampen rate-cut expectations and the market is not expecting a rate cut in the first quarter of 2025. The money markets have currently priced in a quarter-point cut at the Jan. 29 meeting at below 3% and at the March meeting at around 20%. With inflation largely under control and a solid labor market, there is little reason for the Fed to cut rates in the near term.
BoJ’s Himino: BoJ will discuss rate hike at Jan. 24 meeting
The Bank of Japan tends not to telegraph its rate plans, leaving investors in the dark and on the hunt for clues about the central bank’s rate plans. The uncertainty adds to the drama ahead of BoJ meetings and means that each meeting should be treated as a market-mover.
BoJ’s Deputy Governor Ryozo Himino said on Tuesday that the BoJ would discuss a rate hike at the Jan. 24 meeting. Himino didn’t say what decision he expected the BoJ to make but reiterated Governor’s Ueda recent comments that wage growth was solid and that there was a lot of uncertainty surrounding Donald Trump’s trade policies.
USD/JPY Technical
- USD/JPY tested resistance at 158.13 earlier. Above, there is resistance at 158.49
- There is support at 157.78 and 157.42
