Tokyo CPI and BoJ decision: Yen’s central bank week draws to a close

• 158.00 remains just above USD/JPY. The pair has recovered most of its October 22-23 decline.
• Most Fed officials do not see the economy as overheating, according to Fed Chair Warsh.
• A 1.25% hold carries a market-implied probability of nearly 86% ahead of Friday's BoJ decision.

158.00 is just above the current USD/JPY rate. Most of the October 22-23 decline has been recovered, with the Fed's decision to leave rates unchanged failing to extend that fall. Before the announcement, the pair traded above 158.00. It then reached its session peak below 158.50 as Fed Chair Warsh began his press conference. The latest level remains above the session trough, which was just over 157.50.

Faster growth does not automatically imply higher inflation, Fed Chair Warsh said, adding that most Fed officials do not consider the US economy to be overheating. As he answered questions, USD/JPY surrendered its advance above 158.00. The Fed had kept rates at 3.75%-4.00%, compared with 1.25% at the Bank of Japan (BoJ).

A global technology-stock sell-off accompanied the October 22-23 fall in USD/JPY, as investors repurchased the Yen they had borrowed. The pair subsequently recovered alongside chip stocks on Monday and Tuesday. Compared with Monday's chip-stock rebound, Wednesday's Fed announcement and press conference generated a narrower trading range in USD/JPY.

12:30 GMT: US data lead the calendar

Third-quarter US growth figures and September price data arrive on Thursday at 12:30 GMT, informing the Fed side of the interest-rate differential driving USD/JPY. At 23:30 GMT, attention turns to Tokyo's October Consumer Price Index (CPI). The reading excluding fresh food is forecast at 2.6%, down from 2.7%, while Japan's unemployment rate is expected to remain at 2.5%.

Friday brings the BoJ rate decision, for which no release time is fixed. Its quarterly outlook report is scheduled for 03:00 GMT, followed by questions to BoJ Governor Ueda at 06:30 GMT. Markets assign nearly 86% probability to unchanged rates. These events therefore have implications for the timing of the next rate increase and the BoJ side of the differential.

50-day and 200-day EMAs bracket USD/JPY

Roughly a fifth of a yen separates the 50-day and 200-day Exponential Moving Averages (EMA), with USD/JPY currently between the two. The trading range since October 1 stretches from slightly above 156.00 to slightly below 159.00. Its lower boundary is the October 23 low.

USD/JPY: daily price chart