- USD/JPY oscillates around the 147.68-147.88 region in a narrow trading band.
- The Federal Reserve (Fed) is likely to hold rates steady on its September meeting.
- The possibility that the Bank of Japan (BoJ) is notably closer than initially thought to abandon ultra-loose policy rising.
- Fed interest rate decision, BoJ monetary policy meeting will be closely watched events.
The USD/JPY pair consolidates in a narrow range after retracing from the 147.95 area during the early European session on Monday. Markets turn cautious ahead of the key event from both the Federal Reserve (Fed) and Bank of Japan (BoJ) this week. The major currently trades near 147.68, losing 0.11% on the day.
The Empire State Manufacturing Index in August improved to 1.9 from -19 in the previous reading, above the market estimate of a 10 decrease, the Federal Reserve Bank of New York reported on Friday. Also, Industrial Production rose by 0.4% MoM from 1% in July, surpassing market expectations. The preliminary Consumer Sentiment Index for September fell from 69.1 to 67.7, per the University of Michigan. Meanwhile, the five-year Consumer Inflation Expectation came in at 2.7% from 3% prior.
The market expects Fed to hold interest rates steady at its policy meeting on Wednesday while keeping one more rate hike on the table. Fed Chairman Jerome Powell will later hold a press conference with no major changes expected from the Fed. However, a dovish stance from official might trigger a decline in the US Dollar (USD) and acts as a headwind for the USD/JPY pair.
On the JPY’s front, the BoJ policy meeting on Friday will be in the spotlight. The possibility that BoJ is notably closer than initially thought to abandoning ultra-loose policy and negative interest rates rising. However, the BoJ policymaker stated last week that an exit from an ultra-easy policy will not be considered as long as wage and inflation data do not meet expectations, leaving the JPY vulnerable against its rivals.
Market participants will closely watch the Federal Reserve (Fed) interest rate decision on Wednesday. The market anticipates the Fed to maintain interest rates unchanged at its policy meeting. The attention will shift to the Bank of Japan (BoJ) on Friday.
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