- USD/JPY recovers from 156.00 as the Japanese Yen's recent two-day rally pauses.
- US President Trump is expected to announce new policies on tariffs and taxes soon.
- The Bank of Japan (BoJ) is set to discuss potential interest rate hikes at next week's policy meeting.
The USD/JPY pair finds buying interest after hitting a fresh four-week low of 156.00 during Friday’s European session. The rebound comes as the US Dollar (USD) strengthens, with investors adopting a cautious stance ahead of US President-elect Donald Trump’s inauguration on Monday.
Market expectations are high that Trump will announce new tariff and tax policies immediately after returning to the White House. Analysts believe these policies will be pro-growth and inflationary for the US economy, enabling the Federal Reserve (Fed) to maintain current interest rates.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s performance against six major currencies, holds steady above the crucial 109.00 support level.
The US Dollar has been broadly under pressure this week as traders raised dovish bets on the Federal Reserve following the release of the December Consumer Price Index (CPI). The core inflation rate unexpectedly slowed to 3.2%, down from 3.3%, marking the lowest reading in over three years.
Meanwhile, the Japanese Yen (JPY) weakens on Friday after a strong two-day rally, despite reports that a majority of Bank of Japan (BoJ) officials are expected to discuss interest rate hikes at the upcoming policy meeting on January 23-24. BoJ Governor Kazuo Ueda confirmed that the central bank will evaluate economic data thoroughly and include its findings in the quarterly outlook report before deciding whether to raise interest rates at next week’s meeting.
