Investors await Fed and BoJ decisions this week, with markets pricing a 62% chance of unchanged US rates and a hawkish BoJ stance.
The USD/JPY pair trades at 163.90, up 0.11% on Tuesday, as traders adopt a cautious stance before the Federal Reserve’s policy decision on Wednesday and the Bank of Japan’s announcement on Friday. The lack of immediate catalysts has kept the pair range-bound, with markets seeking clarity on both central banks’ next moves.
The US Dollar Index (DXY) edges higher, though the USD shows no clear direction ahead of the Fed meeting. Markets assign a 62% probability of the Fed holding rates steady at 3.5%-3.75%, while a September rate hike remains a strong possibility. Fed Chair Jerome Powell’s previous remarks suggested limited forward guidance, leaving investors to parse any hints on inflation persistence above the 2% target.
In Japan, the BoJ is expected to keep its policy rate at 1% on Friday but maintain a hawkish tone amid inflation conditions. The central bank’s stance will be closely watched for signals on future monetary tightening.