On Thursday, the Japanese yen (JPY) made some gains against the US dollar (USD), resulting in a slight decrease in the USD/JPY pair, which was hovering around 158.30—down from a one-week high at the start of the European session.
However, there hasn’t been much selling pressure as traders are holding off on aggressive moves with the Bank of Japan’s interest rate decision looming on Friday. The central bank is largely expected to maintain its policy rate at 0.75%. Instead, attention will shift to the statements and press conferences post-meeting for insights on future rate hikes.
At the same time, there are growing concerns regarding the yen as Japan faces fiscal issues. Prime Minister Sanae Takaichi is set to dissolve parliament on Friday in preparation for a snap general election planned for February 8.
This potential election raises worries that it might lead to increased government spending under Takaichi’s pro-stimulus agenda, which has already sparked fears over Japan’s significant public debt. Such developments could complicate and prolong the Bank of Japan’s cautious approach to normalizing its policies.
The national consumer price index (CPI) statistics from Japan are also set to be released on Friday, bringing additional uncertainties that may affect views on the Bank of Japan’s monetary policy trajectory.
In the US, stable inflation figures and solid growth metrics did little to bolster the dollar’s position. The core personal consumption expenditures (PCE) rose by 2.9% in the third quarter, meeting expectations and remaining unchanged from the previous quarter.
Forecasts also indicated the US economy could grow at an annualized rate of 4.4% in the third quarter, surpassing the anticipated 4.3%, with an uptick from the 3.8% growth recorded in the second quarter.
Meanwhile, initial jobless claims saw a slight increase to 200,000 from the previous week’s revised number of 199,000, yet this was still significantly below the forecast of 212,000.
Looking ahead to Friday, the US economic calendar includes preliminary data from the S&P Global Purchasing Managers’ Index (PMI) and consumer sentiment figures from the University of Michigan (UoM).
