This Week: Bank of Japan interest rate decision, USDJPY in focus

• USDJPY potential trading range: 153.2–158.7
   
• JPY gains 1% YTD on BoJ rate hike expectations
   
• Monday: Trump policies may sway USD strength
   
• Friday: BoJ decision, Japan CPI could boost JPY
   
• Global data highlights: PMIs, CPI, retail sales

The Japanese Yen is off to a roaring start in 2025, being the best-performing G10 currency against the US dollar for the period.

JPY’s 1% year-to-date climb against the US dollar is largely due to broad expectations for a rate hike by the Bank of Japan (BoJ), in stark contrast to the planned rate cuts by its major central banking peers (Fed, ECB, BOE etc.).

Seasoned markets watchers will be all too aware of the BoJ’s penchant for shocking markets, as they’ve done multiple times over decades past.
 

No surprise USDJPY is forecasted to be the most volatile major FX pair this week, with 153.2 – 158.7 forecasted to be the likeliest trading range, according to Bloomberg’s FX forecast model.

Events Watchlist:
 

• Monday, Jan 20th: Trump inauguration day

Markets are eagerly anticipating which policies will be rolled out on day 1 of Trump 2.0. From mass deportations, to pro-business tax cuts and de-regulations, or even global tariffs, these policies threaten to trigger massive moves across various asset classes on Monday, even as US markets will be closed.

Policies that reawaken US inflationary pressures and prevent the Fed from cutting rates aggressively should boost the US Dollar, king of the FX universe, at the expense of other currencies including the Japanese Yen.

• Friday, Jan 24th: Bank of Japan (BoJ) rate decision; Japan Dec. national consumer price index (CPI)

Markets are predicting a 90% chance that the BoJ will raise interest rates again for the first time since July 2024. More importantly, markets have also fully priced in a total of 50-basis points in BoJ rate hikes this year, including the upcoming week’s 25-bps hike. It’s now time for the BoJ to either deliver, or dash, on such expectations.

Should BoJ Governor Kazuo Ueda indeed pave the road for further rate hikes in the months ahead, that should boost JPY while dragging USDPY towards its 200-day simple moving average (SMA).

Such hawkish and potentially Yen-boosting signals may also be derived from higher-than-expected CPI figures also due Friday, with the headline CPI year-on-year number estimated to come in at 3.4%, higher than November’s 2.9% figure.

Here’s a comprehensive list of other key economic data and events due this week:
 

Monday, January 20

• CNH: China loan prime rates
   
• GER40 index: Germany January PPI
   
• USDInd: Trump inauguration day
   
• US markets closed
   

Tuesday, January 21

• TWN index: Taiwan December export orders
   
• EUR: Eurozone January ZEW survey expectations
   
• GBP: UK November unemployment rate, weekly earnings, jobless claims
   
• CAD: Canada December CPI
   
• Netflix earnings
   

Wednesday, January 22

• NZD: New Zealand 4Q CPI
   
• TWN index: Taiwan December unemployment rate
   
• EUR: Speeches by ECB President Christine Lagarde and Governing Council members, Francois Villeroy de Galhau and Klaas Knot

Thursday, January 23

• JPY: Japan December trade balance
   
• SG20 index: Singapore December CPI
   
• TWN index: Taiwan December industrial production
   
• NOK: Norges Bank rate decision
   
• EU50 index: Eurozone January consumer confidence
   
• CAD: Canada November retail sales
   
• US30 index: US weekly initial jobless claims
   

Friday, January 24

• JPY: Bank of Japan rate decision; Japan December national CPI
   
• SG20 index:  Singapore December industrial production
   
• TWN index: Taiwan 4Q/2024 GDP
   
• EUR: Germany January PMIs
   
• GBP: UK January PMIs
   
• RUS2000 index: US January PMIs, consumer sentiment