Forex
Dollar Hikes Loom as USD/JPY Hinges on Key CPI Data
The US dollar price action is set for key developments in the coming week. A potential hike of at least 25 basis points (bps) by the Federal Reserve is expected, with a greater than 50% chance that it will happen next Wednesday during the FOMC rate decision meeting.
Among major currency pairs, USD/JPY remains under intense scrutiny due to its crowded carry trade dynamics. This has introduced significant US dollar risk, which can spill over into other markets such as EUR/USD and GBP/USD.
A crucial data point for the pair will be Friday's release of the CPI print. Historically, US CPI prints have had a massive impact on USD/JPY price movements, particularly since 2022 when the pair first breached the 150 mark.