USD/JPY rises to near 156.00 ahead of US CPI data, BoJ policy decision

USD/JPY moves higher to near 156.00 in the countdown to the US inflation data.
Fed’s Bostic sees inflation more worrying than the job market.
The BoJ is expected to raise interest rates by 25 bps to 0.75% on Friday.

Sagar Dua FXStreet

The USD/JPY pair trades higher around 156.00 during the European trading session on Thursday. The pair gains as the US Dollar (USD) rises ahead of the United States (US) Consumer Price Index (CPI) data for November, which will be published at 13:30 GMT.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally higher to near 98.50.

As measured by the Consumer Price Index (CPI), the headline inflation is expected to have risen at an annualized pace to 3.1% from 3% in October. In the same period, the core CPI – which excludes volatile food and energy items – is estimated to have remained steady at 3%.

Investors will pay close attention to the US inflation data as its impact will be significant on market expectations for the Federal Reserve (Fed) interest rate outlook, given that all officials believe that price pressures are very high.

Last week, Fed Chair Jerome Powell said in the press conference, following the interest rate decision, “Everyone at the table agrees inflation is too high.”

On Wednesday, Atlanta Fed Bank President Raphael Bostic stated that “inflation is more worrying than jobs”, in a discussion at the Gwinnett County Chamber of Commerce in Georgia.

Meanwhile, the Japanese Yen (JPY) is broadly on the back foot even as the Bank of Japan (BoJ) is expected to raise interest rates by 25 basis points (bps) to 0.75% on Friday. As the BoJ is almost certain to tighten its monetary conditions, investors would look for cues regarding the outlook of the policy-tightening campaign amid ongoing fiscal concerns.

Japan’s revised Q3 Gross Domestic Product (GDP) estimates showed last week that the economy contracted at a faster pace of 0.6% against the preliminary reading of 0.4%.

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.

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