Central Banks Meet Market Expectations, but Energy Prices Hold Key

The Federal Reserve (Fed) and Bank of Japan (BOJ) decisions will dominate headlines this week, but central bank actions may not be as significant in terms of volatility generation.

Instead, market participants will focus on signaling from the Fed via its updated dot plot and economic projections, while the BOJ's tone in its statement and Governor Ueda's press conference will take center stage.

However, a key swing factor that could override central bank discussion is energy prices, which have a tight link with US yields and the dollar. A strong correlation exists between crude oil movements and 10 and 30-year Treasury yields, with WTI showing +0.78 and +0.96 respectively over the past five sessions.

Energy price evolution could be equally important, if not more so, in determining USD/JPY performance this week.