USD/JPY remains capped below 152.50 ahead of Fed and BoJ decisions

The US Dollar bounces up from the 152.00 area but remains capped below 152.50.
Investors are bidding their time ahead of the Fed and BoJ monetary policy decisions.
US Secretary Scott Bessent has shown his support for the BoJ's independence.

Guillermo Alcala FXStreet

The Greenback is trimming some losses against the Japanese Yen on Wednesday, yet with upside attempts limited below the 152.50 level so far. Investors are wary of placing US Dollar directional bets, awaiting the outcome of the Federal Reserve monetary policy meeting, due on Wednesday at 118:00 GMT.

The Fed is widely expected to lower rates by 25 basis points for the second consecutive time, lowering the Fed Funds rate to the 3.75% - 4.0% range. With this in mind, investors will be looking for clues to confirm market expectations of a further interest rate cut in December.

Beyond that, the US Central Bank might also announce the end of its balance sheet reduction, the so-called quantitative tightening program, amid growing concerns that credit conditions might have deteriorated too much.

The Bank of Japan, on the other side, is likely to keep interest rates unchanged at a 0.5% rate and hint at a 25 basis points rate hike, probably in December. US Treasury Secretary, Scott Bessent, has given a further boost to this view, stating that the central bank's independence is key to avoiding excessive currency volatility, adding pressure for the BoJ to keep tightening its monetary policy.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

Economic Indicator

BoJ Interest Rate Decision

The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.

USD/JPY stays below 160.50 as markets assess BoJ decision

USD/JPY fluctuates in a relatively narrow range above 160.00 on Tuesday as markets assess the Bank of Japan's (BoJ) decision to raise the policy rate by 25 at the June meeting. Meanwhile, investors keep a close eye on news coming out of the Middle East, while preparing for the critical Fed meeting.

AUD/USD trades in tight channel near 0.7050 despite hawkish RBA message

AUD/USD trades modestly lower on the day at around 0.7050 on Tuesday as markets adopt a cautious stance amid a lack of details surrounding the US-Iran peace agreement. The Reserve Bank of Australia (RBA) left the door open for possible policy tightening after leaving the interest rate unchanged, as expected, at the June meeting but failed to boost the Australian Dollar.

Gold: Recovery remains capped by $4,400 for now

Gold continues to trade with a constructive tone and flirts with the $4,350 zone per troy ounce on Tuesday. The early enthusiasm sparked by the US-Iran peace deal has faded somewhat, prompting investors to adopt a more prudent stance as they await further details of the agreement and key guidance from the Fed.

Solana's rebound gains momentum as ETF inflows return

Solana (SOL) steadies at $73 after posting three consecutive green candlesticks since the weekend. The recent recovery is supported by institutional demand, with spot Exchange Traded Funds recording net inflows of $2.81 million on Monday.

BoJ just hiked and US-Iran deal is on the table: Why Japanese Yen is still around 160.00

The Bank of Japan lifted interest rates from 0.75% to 1.00%, its highest level in more than three decades. The landmark move aims to stabilize a sharply weakening Japanese Yen, but by looking at the immediate market reaction, it doesn’t look like it’s going to work.

4.2% headline, 0.2% core: Why the Fed's next hike may be targeting the wrong problem

May's CPI put headline inflation at 4.2% on the year, up from 3.8% in April and the hottest reading since April 2023, while core prices rose just 0.2% on the month, undershooting the 0.3% consensus and halving April's pace.