interest rate decisions landing just hours apart. These twin events overshadow all other data, including the Fed’s preferred inflation measure, the core PCE deflator, released on Friday. How the market reacts to these decisions will likely define USD/JPY's trajectory as we enter 2025.Before digging into the details, here’s next week’s major events calendar for the United States and Japan. Note times shown are US Eastern.
The long-run dot, reflecting the median FOMC estimate for the neutral policy rate, may also shift higher. While members have been cautious about revising these projections, a minor adjustment to 3% or slightly above seems likely. A larger revision to 3.2% or more could trigger a sharp rise in US Treasury yields, with the Japanese yen likely to feel the heat.The 10-year Treasury note future has rolled over decisively, with momentum shifting sharply to the downside.
That said, the US rate outlook remains the dominant driver of USD/JPY movements for now. Once the initial volatility from the BoJ decision fades, expect US Treasury yields to reassert their influence.The impact of higher US Treasury yields on USD/JPY is obvious on the daily chart, with the pair resuming its push higher just as yields bottomed.
Good luck with your trading and thanks to everyone who has read these weekly outlook guides in 2024. Coverage in 2025 will resume midway through January.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events.