USD/JPY Strengthens Near 149.00 Amid FOMC Minutes Release
- US Core CPI Expected to Grow at 3.2% in September
- Japanese Yen Influenced by PPI Data for September
The USD/JPY pair is holding steady near a seven-week high around 149.00 during Wednesday’s North American session. This uptrend comes ahead of the release of the Federal Open Market Committee (FOMC) minutes from the September meeting, scheduled for 18:00 GMT.
Fed’s Recent Rate Decision and Market Sentiment
During the last policy meeting, the Federal Reserve (Fed) reduced its key borrowing rates by 50 basis points to 4.75%-5.00%. This dovish move, the first in over two-and-a-half years, was driven by concerns over weakening labor demand and a growing confidence in inflation reaching the bank’s 2% target.
Market sentiment towards the US Dollar (USD) remains positive, with expectations that the Fed will not implement another 50 bps rate cut in November. The US Dollar Index (DXY) is reflecting this optimism, hitting a fresh seven-week high near 102.80 against a basket of major currencies.
Upcoming Data Releases and Market Implications
Investors are eagerly awaiting the FOMC minutes to gain insights into officials’ views on potential interest rate actions in the final quarter of the year. Current market pricing, as indicated by the CME FedWatch tool, suggests expectations of two 25 bps rate cuts in the remaining meetings of 2021.
Looking ahead, the US Consumer Price Index (CPI) data for September, set to be published on Thursday, will be a key driver for the US Dollar. The core CPI, excluding volatile food and energy prices, is anticipated to show a steady growth rate of 3.2%.
On the Japanese front, investors will closely monitor Japan’s Producer Price Index (PPI) data for September, also due on Thursday. Expectations point to a slightly slower pace of increase at 2.3% compared to 2.5% in August. Persistent producer inflation could lead to heightened expectations of further policy actions by the Bank of Japan (BoJ).
Fed FAQs
Here are some frequently asked questions about the Federal Reserve (Fed) and its monetary policies:
How Does the Fed Influence the US Dollar?
The Fed adjusts interest rates to achieve price stability and full employment. Higher rates strengthen the US Dollar, making it more attractive for international investors. Lower rates, on the other hand, can weaken the Greenback to stimulate borrowing and economic activity.
What Happens During FOMC Meetings?
The Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. It consists of twelve Fed officials, including members of the Board of Governors and regional Reserve Bank presidents.
What is Quantitative Easing (QE) and Quantitative Tightening (QT)?
QE is a tool used by the Fed to increase credit flow during crises or low inflation periods, weakening the US Dollar. QT, on the other hand, involves reducing bond purchases, which can strengthen the Greenback.