The Japanese Yen is already the best-performing G10 currency against the US dollar so far this month.USDJPY has been dragged below its 200-day simple moving average (SMA), down to its lowest levels since early August, thanks to hopes for Fed rate cuts coupled with BoJ rate hikes in 2024.

Markets are currently the most bullish on the Yen’s one-week prospects versus the US dollar since late July, as the highly-anticipated Bank of Japan (BoJ) policy decision awaits.

Bloomberg’s FX model forecasts a 71.3% chance that USDJPY would trade within the 137.75 – 144.97 range this week.
 Events Watchlist

  • Tuesday, December 19: Bank of Japan (BoJ) policy decision

    • The BoJ is widely expected to keep its policy balance rate rooted at minus 0.1% at this meeting. Still, seasoned market watchers would be wary of the BoJ’s penchant for December shockers (recall the surprise policy tweak in Dec 2022). USDJPY could see some relief if the BoJ douses bets for a rates liftoff in 2024.

  • Friday, December 22: Japan November CPI

    • Amid forecasts that this CPI print will rise by 2.7% year-on-year (though lower than October’s 3.3% number), a higher-than-expected CPI print before Christmas may pave the way for a BoJ rate hike in 2024. Such expectations are set to drag USDJPY even lower.

  • Friday, December 22: US November PCE deflator

    • The Fed’s preferred inflation gauge is forecasted to come in at 3.4% year-on-year (November 2023 vs. November 2022), slightly lower than October’s 3.5%. The month-on-month print is expected to stand pat at 0.2%.
    Further evidence of cooling inflation, coupled with still resilient US economic data this week on 3Q GDP, weekly jobless claims, personal income and spending, as well as consumer sentiment, may well bolster the soft-landing narrative and hopes for Fed rate cuts next year. Such a combo may exert more downward pressure on USDJPY.

    Here’s comprehensive list of other key economic data and events due this week:Monday, December 18

  • NZD: New Zealand 4Q consumer confidence
  • EUR: Germany December IFO business climate
  • NQ100_m annual reconstitution

    • Tuesday, December 19

  • NZD: New Zealand November external trade
  • AUD: RBA meeting minutes
  • JPY: BoJ rate decision
  • EUR: Eurozone November CPI (final)
  • CAD: Canada November CPI
  • USD: Speech by Atlanta Fed President Raphael Bostic

    • Wednesday, December 20

  • NZD: New Zealand December consumer confidence
  • JPY: Japan November external trade
  • CNH: China loan prime rates
  • EUR: Eurozone December consumer confidence; Germany November PPI, January consumer confidence
  • GBP: UK November CPI
  • USD: US December consumer confidence

    • Thursday, December 21

  • CAD: Canada October retail sales
  • USD: US weekly initial jobless claims; 3Q GDP (final)
  • Nike earnings

    • Friday, December 22

  • JPY: Japan November CPI; BoJ meeting minutes
  • GBP: UK November retail sales, 3Q GDP (final)
  • CAD: Canada October GDP
  • USD: US November PCE deflator; personal income and spending; December consumer sentiment (final)

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