USD/JPY eyes Fed minutes

The yen has edged lower on Wednesday in what has been a quiet week. In the European session, USD/JPY is trading at 148.72, up 0.36%.

Will Fed minutes provide clues for November meeting?

The Federal Reserve will release the minutes of the September meeting later today. That meeting was a milestone as the Fed delivered an oversized rate of 50 basis points, the first cut in over four years. The minutes should provide some insights into the Fed’s reasoning for the jumbo rate cut and perhaps clues as to its rate path. The September cut came after back-to-back employment reports were weaker than expected.

What can we expect from the Fed moving forward? Last week’s nonfarm payroll report of 254 thousand was much stronger than expected and the unemployment rate ticked lower to 4.1%. These latest figures have put Fed policy makers in a bind – employment is showing resilience while inflation has been falling. Fed member Philip Jefferson said on Tuesday that the risks to inflation and employment were evenly balanced. Jefferson added he was making decisions on a monthly basis and it’s likely that other Fed members are doing the same.

Market rate pricing continues to swing and currently, the probability of a 25-bps stands at 86%. That could change after Thursday’s inflation report, which is expected to fall to 2.3% in September, down from 2.5% in August.

In Japan, voters will head to the polls on October 27. New Prime Minister Shigeru Ishiba called the election just eight days after taking office. The yen has slumped during his short tenure, as Ishiba has backtracked on monetary policy, saying there is no need to raise interest rates.

USD/JPY Technical

• USD/JPY tested resistance at 148.61 earlier. Above, there is resistance at 149.01
• 147.97 and 147.57 are providing support

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