JPY depreciates. BoJ and Fed rate decisions could trigger rebound

• JPY underperforms despite wage hike news
   
• BoJ expected to hold rates steady at 0.50%
   
• Fed decision may hint at an early rate cut
   
• Japan’s CPI could influence BoJ’s next move
   
• USDJPY range forecast: 146.4 – 151.2

At the time of writing, the Japanese Yen was the worst G10 performer against the US dollar on Friday, March 14th.

JPY likely experienced a case of “sell the news”, after Japan’s largest labour union – Rengo – secured a 5.46% average wage gain, which was its biggest pay hike since 1991.
 

However, the yen’s fortunes may reverse in the day ahead, with mid-week rate decisions out of either side of the Pacific, along with Japan’s inflation data due before the weekend.

Amidst these tier-1 events, Bloomberg’s FX model predicts USDJPY has a 72.3% chance of trading between 146.4 – 151.2.
 

Events Watchlist:
 

• Wednesday, March 19th: Bank of Japan (BoJ) rate decision

To be clear, the BoJ is widely expected to keep its target rate unchanged at 0.50%. However, given Rengo’s wage negotiation results, Japan’s central bank may be bolder with its next hike – which markets only predict will happen in June. Should the BoJ hint that a May hike might be on the cards, USDJPY could fall towards 147.

• Wednesday, March 19th: Federal Reserve (Fed) rate decision

The Fed (specifically the Federal Open Market Committee) also isn’t expected to adjust its benchmark rates this week. The FOMC’s next rate cut is only slated for June, according to market forecasts. However, if the Fed hints at an earlier-than-June cut to offset economic risks from President Trump’s trade war, USDJPY may recover above its 21-day simple moving average (SMA), assuming the dollar rebounds on allayed US recession fears.

• Friday, March 21st: Japan February national consumer price index (CPI)

Economists predict Japan’s headline CPI moderated to 3.5%, but the core-core print (excluding fresh food and energy prices) ticked up to 2.6% year-on-year, still well above the BoJ’s 2% target. An upside surprise to this latest inflation data that paves the way for a BoJ hike in May could set a new year-to-date low for USDJPY.

Here’s a comprehensive list of other key economic data and events due this week:
 

Monday, March 17

• CN50 index: China February home prices, industrial production, retail sales
   
• US30 index: US February retail sales
   
• XAU: OECD to release interim economic outlook
   

Tuesday, March 18

• EUR: Germany March ZEW survey expectations
   
• CAD: Canada February CPI
   
• US30 index: US February industrial production
   

Wednesday, March 19

• JPY: Bank of Japan rate decision; Japan February trade balance
   
• EU50 index: Eurozone February CPI (final)
   
• HK50 index: Tencent earnings
   
• USDInd: Fed rate decision
   

Thursday, March 20

• NZD: New Zealand 4Q GDP
   
• AUD: Australia February unemployment
   
• CNH: China loan prime rates
   
• ZAR: SARB rate decision
   
• GER40 index: Germany February PPI
   
• UK100 index: BOE rate decision; UK data dump
   
• TWN index: Taiwan rate decision; February export orders
   
• CHF: SNB rate decision
   
• SEK: Sweden’s Riksbank rate decision
   
• RUS2000 index: US initial weekly jobless claims
   

Friday, March 21

• NZD: New Zealand February trade balance
   
• JP225 index: Japan February national CPI
   
• EU50 index: Eurozone March consumer confidence
   
• CAD: Canada January retail sales