15 Jan 2025

The USD/JPY has declined to approximately 157.00, as the hawkish comments from BoJ Governor Ueda enhance the attractiveness of the Japanese Yen. Ueda has indicated that the possibility of increasing interest rates will be considered during the policy meeting scheduled for January 23-24. The subsequent movement of the USD will be affected by the US inflation figures for December.

Ueda remarked on the wage growth outlook, noting that there was considerable "positive sentiment regarding wage prospects" during his discussions with the Bank of Japan's regional branch managers last week.

In addition, a significant sell-off in the asset has been prompted by a slight decrease in the value of the US Dollar (USD) in anticipation of the US Consumer Price Index (CPI) data for December, scheduled for release at 13:30 GMT. The US Dollar Index (DXY), which measures the Greenback’s performance against six major currencies, has fallen to approximately 109.00.

Market participants are expected to closely monitor the US inflation figures, as these will shape expectations regarding the Federal Reserve’s (Fed) monetary policy direction. Year-on-year headline inflation is projected to rise to 2.9%, up from 2.7% in November, while the core inflation rate, which excludes the more volatile food and energy sectors, is anticipated to increase steadily to 3.3%. According to the CME FedWatch tool, traders foresee only one interest rate cut by the Fed this year.