USD/JPY volatile as investors digest PCE data, BOJ’s Decision

After four days of losses, the USD/JPY pair almost reached 150.00. After the BOJ’s Monetary stance Statement reiterated its ultra-loose stance, USD/JPY gave up earlier gains.

US Core PCE declined to 4.1% YoY in June, which fueled a drop in US rates. The USD/JPY pair hit a daily low of 138.05. At the time of writing, it was trading at 141.09, down from the 150.00 region, 1% above its opening price.

The US dollar, as represented by the DXY index, is currently trading roughly flat after being weighed down by disappointing June Core Personal Consumption Expenditures (PCE) data.

As Fed Chair Jerome Powell explicitly said that current choices will depend on incoming data, US Treasury yields are declining to Core PCE, retreating to 4.1% below forecasts. The Federal Reserve (Fed), however, will receive two further sets of inflation and employment report statistics, which will be the ones that model the tightening expectations, until the next September meeting.

The upward trajectory of the pair is, however, explained by markets’ dovish assessments of the Bank of Japan’s (BoJ) monetary policy decision. It ended with an unexpected Yield Curve Control (YCC) modification but no hikes were declared or even hinted at. The move, according to Governor Ueda, was not a step towards normalization because the bank is still a long way from being able to raise short-term capital.