• USD/JPY ticks lower as the US Dollar trades subduedly, with investors looking for cues about the likely full-fledged Trump tariff plan.
• Investors expect the Fed to leave interest rates unchanged on Wednesday.
• The BoJ is anticipated to announce its third interest rate hike decision.

The USD/JPY pair ticks lower to near 156.30 in Thursday’s European session. The asset faces slight pressure as the US Dollar (USD) trades subduedly as investors seek clarity over the tariff plan by United States (US) President Donald Trump. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower but holds the key support of 108.00.

Donald Trump has not yet released a full-fledged tariff plan, while investors anticipated that he will unveil the tariff hike structure for all economies right on his first day of administration. In first three days of Trump administration, he has threatened 25% tariffs on Canada and Mexico and 10% on China, which will come into effect on February 1.

Going forward, investors should brace for significant volatility in the US Dollar as the Federal Reserve (Fed) is going to announce its first monetary policy decision of the year on Wednesday. The Fed is certain to announce a pause in the policy-easing spell, according to the CME FedWatch tool. Therefore, investors will pay more attention to the Fed’s interest rate guidance and the likely impact of Trump’s economic policies on the economy and monetary policy.

But before that, investors will focus on the flash US S&P Global Purchasing Managers’ Index (PMI) data for December, which will be released on Friday.

In the Asia-Pacific side, investors await the Bank of Japan’s (BoJ) monetary policy announcement on Friday. The BoJ is expected to raise interest rates. This would be the third interest rate hike by the BoJ of the current policy-tightening cycle. BoJ hawkish bets accelerated after some officials, including Governor Kazuo Ueda, commented that rate hikes would be discussed in the January meeting. “The central bank is currently analyzing data thoroughly and will compile the findings in the quarterly outlook report, and based on that, the bank will discuss whether to raise interest rates at next week’s policy meeting,” Ueda said.

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.

Read more.

Next release: Fri Jan 24, 2025 03:00

Frequency: Irregular

Consensus: 0.5%

Previous: 0.25%

Source: Bank of Japan

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