USD/JPY – Unchanged Ahead of Fed Statement, Japanese Retail Sales

The Japanese yen has been marked by choppy trade on Wednesday, as USD/JPY trades just shy of the 118 line early in the North American session. On the release front, Japan will release Retail Sales later in the day. The markets are expecting a strong rebound of 1.1% in the January release. In the US, the markets are keeping a close eye on the FOMC Statement. The only other event is Crude Oil Inventories, with the markets expecting a strong downturn in the upcoming report.

The Federal Reserve will be in the spotlight on Wednesday, with the release of a policy statement at the end of a two-day meeting. The Fed is expected to continue to counsel patience regarding an interest rate hike, and persistently weak inflation means the Fed can take its time before having to make a monetary move. The markets will be combing through the statement and any clues as to the timing of rate hike could shake up the currency markets.

There was mixed numbers out of the US on Tuesday. Durable Goods Orders plunged 3.4%, marking a 4-month low. There was no relief from Core Durable Goods Orders, which declined by 0.8%, its fifth drop in six readings. The markets had expected gains from both indicators. There was much better news later in the day, as CB Consumer Confidence jumped to 102.9 points, crushing the estimate of 95.3 points. New Home Sales followed suit, rising to 481 thousand, well above the forecast of 452 thousand.

Japanese corporate inflation remained steady in December, as the Services Producer Price Index posted a gain of 3.6%. The index has now posted identical gains for three consecutive months. There was good news earlier in the week, as the Japanese trade deficit narrowed sharply in December. The deficit dropped to JPY 0.71 trillion, slightly below the estimate of 0.74 trillion and its lowest reading since June 2013.

USD/JPY 117.90 H: 118.26 L: 117.55