- The USD/JPY ticks lower to near 148.00 ahead of the Fed and BoJ’s monetary policy decision.
- Investor expect both central banks to leave interest rates steady.
- The impact of tariffs by the US has started feeding into prices.
The USD/JPY pair edges down to near 148.00 during the European trading session on Wednesday. The pair faces a slight selling pressure ahead of the Federal Reserve’s (Fed) monetary policy decision at 18:00 GMT.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto gains near a fresh monthly high around 99.00.
According to the CME FedWatch tool, the Fed is certain to leave interest rates steady in the range of 4.25%-4.50%. This would be the fifth straight policy meeting when the US central bank will hold borrowing rates at their current levels.
Investors will closely monitor Fed Chair Jerome Powell’s press conference to get cues about when the central bank could start reducing interest rates this year. Financial market participants would also focus on comments regarding the impact of tariffs on inflation. This month, the Consumer Price Index (CPI) report for June showed that prices of goods that are largely imported onto the US were partly increased by higher import duties.
Apart from the Fed’s policy, investors will also focus on the preliminary Q2 Gross Domestic Product and Personal Consumption Expenditure Price Index (PCE), and the ADP Employment Change data for July, which will be published during the North American session.
Meanwhile, the Japanese Yen (JPY) outperforms its peers ahead of the Bank of Japan’s (BoJ) monetary policy announcement on Thursday. The BoJ is certain to leave interest rates steady at 0.5%. BoJ Governor Kazuo Ueda is expected to keep the door open for more interest rate hikes this year.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
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Next release:
Wed Jul 30, 2025 18:00
Frequency:
Irregular
Consensus:
4.5%
Previous:
4.5%
Source:
Federal Reserve
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